A Legal Guide to Cloud Computing

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Many companies are considering implementation of cloud computing services to decrease IT costs while providing the flexibility to scale usage on-demand. The cloud model transfers computing resources from an internally-managed software and hardware infrastructure to a third-party-managed, networked solution. Economies of scale are introduced when the cloud computing vendor offers the same platform to multiple customers, allowing all customers to share the cost burden to manage what is essentially a single implementation provisioned among many corporate users.

Even though cloud computing promises huge cost savings, the risks associated with cloud computing are significant. One of the main characteristics of a cloud-based service is that customer data is being stored and processed by the vendor. This basic design feature creates business risks, regulatory responsibilities, and legal risks which need to be identified and addressed by both the customer and the vendor. Each party must completely understand these risks in order to have a successful cloud computing deal. This document outlines the risks facing a customer contemplating a move to cloud computing and includes sample contractual provisions that show how to address and mitigate those risks.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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