One of the key differences between a cloud computing delivery model and a customer-hosted solution is the service provider, not the customer, possesses the customer’s data under a cloud computing delivery model. At the end of such a relationship the customer needs its data returned. Many service providers’ form agreements, however, do not address when and in what format the data will be returned. Given the vital importance of data to a company’s business, a customer should address this issue prior to entering into such an agreement.
What seems like a relatively simple provision to implement can sometimes lead to surprisingly protracted discussions. Customers often request their data be returned at expiration or termination of the contract (or during the termination / expiration period) in the format requested by the customer. Service providers’ concerns with such a requirement is the customer might request a format that is different than that being used, resulting in expensive and time-consuming file conversion. Or the customer might request some of its data in paper and electronic format, requiring the service provider to print reams of paper. These concerns lead service providers to counter with a provision requiring the service provider to return the data in its then-current format.
This typically leads to the customer raising its concern that the data could be returned in a format that is no longer compatible with the customer’s systems, requiring the customer to undertake the expensive and time-consuming conversion process and causing a material adverse impact to the customer’s business.
What’s the right answer? Each negotiation will be different depending on factors such as the importance of the data, the leverage of the parties, and the amount of data at issue. Service providers, however, must be sensitive to the customer’s concerns of the data being the customer’s lifeblood, and the customer not wanting to be held hostage at the end of the relationship. I’ve seen parties eventually agree that the service provider must return the data upon expiration or termination in a format reasonably usable by the customer at no additional cost to the customer, or in a format reasonably requested by the customer and commonly used in the industry based on the type of data.
