Planning for the Exit: How to Terminate Cloud Relationships

May 17, 2023

Cloud technology is one of the most dominant forms of technology used by companies today. In short, everyone and everything is in the cloud.

Given the increased use of the cloud for enterprise-wide and critical business needs, including artificial intelligence (AI) and machine learning—and as an enabler for new services and processes—it is important that companies and service providers take the time to pre-plan for potential termination events and identify key terms and considerations when negotiating such contracts.

We know how businesses are tied into the cloud and that most user data and intellectual property (IP) live there, but how does an organization make sure a user has the right to access and/or transfer this information to a different provider, implementor, or administrator, and make sure the vendor has given clearance to do so?

Having an exit strategy is important when negotiating cloud services agreements. By planning accordingly, parties are better positioned to mitigate risks during any transfer of data or termination of relationships and are more able to maintain flexibility.

On the customer side, a pre-deal checklist should include:

  • A list of all items needed if the vendor “switched off” the service
  • Details on timing: Terms, renewals, and notice periods
  • Transition support time periods
  • Return of data: Specific format, method of transfer, and data protection
  • A plan for managing data egress costs
  • Coordination with “transition in” to the successor provider

On the vendor side, a pre-deal checklist should include:

  • Payment for termination assistance/return of the data
  • The format of returning data
  • Any continued rights of use, or relief of responsibility after the return of data
  • Any necessary ownership of IP related to the cloud or the services provided by vendors

To learn more about the provisions to consider when considering exiting a cloud relationship—and how strategic technology and commercial transactions can enable businesses of all sizes and industries to effectively leverage technology and digital solutions to operate, modernize, and grow—see our Global Digital Transformation webinar series.