Category Archives: saas

Cloud Computing contracts

As many others have pointed out, cloud computing is really nothing new. Before it was called cloud computing, application service providers (ASPs) provided software not as a downloadable product but as an online service. Really, what has changed is the acceleration of software (or infrastructure, data or platforms) as a much more modular and turnkey service. Service providers have minified the transaction costs of software (or hardware). Whereas before purchasing new or additional services took time and effort (i.e. transaction costs) on the part of both the seller and buyer, now it can be requisitioned and provisioned with a few clicks of a mouse, the so-called utility model; one just increases demand by adding more consuming devices and the utility provides.

However, shrinking transaction costs for efficiency means that there is no longer room for substantial negotiations between provider and consumer. This leads to a gap in the needs of the consumer for certain protections (e-discovery, retention, security, privacy etc) and the desires of the provider to limit liability and provide a one size fits all service. Bigger clients, which may command attention and have some bargaining power, make it more difficult for service providers to provide a simple cheap service because of the need for negotiation. I’m suggesting the end result is probably a stratification of service providers in differing industries (or geographically) in order to limit the need for negotiation with clients who have differing needs.