Blog post

Are B2B cloud service agreements safe?

By Lydia Leong | January 13, 2021 | 0 Comments

IndustryCloud Computing

I’m seeing various bits of angst around “Is it safe to use cloud services, if my business can be suspended or terminated at any time?” and I thought I’d take some time to explain how cloud providers (and other Internet ecosystem providers, collectively “service providers” [SPs] in this blog post) enforce their Terms of Service (ToS) and Acceptable Use Policies (AUPs).

The TL;DR: Service providers like money, and will strive to avoid terminating customers over policy violations. However, providers do routinely (and sometimes automatically) enforce these policies, although they vary in how much grace and assistance they offer with issues. You don’t have to be a “bad guy” to occasionally run afoul of the policies. But if your business is permanently unwilling or unable to comply with a particular provider’s policies, you cannot use that provider.

AUP enforcement actions are rarely publicized. The information in this post is drawn from personal experience running an ISP abuse department; 20 years of reviewing multiple ISP, hosting, CDN, and cloud IaaS contracts on a daily basis; many years of dialogue with Gartner clients about their experiences with these policies; and conversations with service providers about these topics. Note that I am not a lawyer, and this post is not legal advice. I would encourage you to work with your corporate counsel to understand service provider contract language and its implications for your business, whenever you contract for any form of digital service, whether cloud or noncloud.

The information in this post is intended to be factual; it is not advice and there is a minimum of opinion. Gartner clients interested in understanding how to negotiate terms of service with cloud providers are encouraged to consult our advice for negotiating with Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP), or with SaaS providers. My colleagues will cheerfully review your contracts and provide tailored advice in the context of client inquiry.

Click-thrus, negotiated contracts, ToS, and AUPs

Business-to-business (B2B) service provider agreements have taken two different forms for more than 20 years. There are “click-through agreements” (CTAs) that present you with a online contract that you click to sign; consequently, they are as-is, “take it or leave it” legal documents that tend to favor the provider in terms of business risk mitigation. Then there are negotiated contracts — “enterprise agreements” (EAs) that typically begin with more generous terms and conditions (T&Cs) that better balance the interests of the customer and the provider. EAs are typically negotiated between the provider’s lawyers and the customer’s procurement (sourcing & vendor management) team, as well as the customer’s lawyers (“counsel”).

Some service providers operate exclusively on either CTAs or EAs. But most cloud providers offer both. Not all customers may be eligible to sign an EA; that’s a business decision. Providers may set a minimum account size, minimum spend, minimum creditworthiness, etc., and these thresholds may be different in different countries. Providers are under no obligation to either publicize the circumstances under which an EA is offered, or to offer an EA to a particular customer (or prospective customer).

While in general, EAs would logically be negotiated by all customers who can qualify, providers do not necessarily proactively offer EAs. Furthermore, some companies — especially startups without cloud-knowledgeable sourcing managers — aren’t aware of the existence of EAs and therefore don’t pursue them. And many businesses that are new to cloud services don’t initially negotiate an EA, or take months to do that negotiation, operating on a CTA in the meantime. Therefore, there are certainly businesses that spend a lot of money with a provider, yet only have a CTA.

Terms of service are typically baked directly into both CTAs and EAs — they are one element of the T&Cs. As a result, a business on an EA benefits both from the greater “default” generosity of the EA’s T&Cs over the provider’s CTA (if the provider offers both), as well as whatever clauses they’ve been able to negotiate in their favor. In general, the bigger the deal, the more leverage the customer has to negotiate favorable T&Cs, which may include greater “cure time” for contract breaches, greater time to pay the bill, more notice of service changes, etc.

AUPs, on the other hand, are separate documents incorporated by reference into the T&Cs. They are usually a superset or expansion/clarification of the things mentioned directly in the ToS. For instance, the ToS may say “no illegal activity allowed”, and the AUP will give examples of prohibited activities (important since what is legal varies by country). AUPs routinely restrict valid use, even if such use is entirely legal. Service providers usually stipulate that an AUP can change with no notice (which essentially allows a provider to respond rapidly to a change in the regulatory or threat environment).

Unlike the EA T&Cs, an AUP is non-negotiable. However, an EA can be negotiated to clarify an AUP interpretation, especially if the customer is in a “grey area” that might be covered by the AUP even if the use is totally legitimate (i.e. a security vendor that performs penetration testing on other businesses at their request, may nevertheless ask for an explicit EA statement that such testing doesn’t violate the AUP).

Prospective customers of a service provider can’t safely make assumptions about the AUP intent. For example, some providers might not exclude even a fully white-hat pen-testing security vendor from the relevant portion of the AUP. Some providers with a gambling-excluding AUP may not choose to do business with an organization that has, for instance, anything to do with gambling, even if that gambling is not online (which can get into grey areas like, “Is running a state lottery a form of gambling?”). Some providers operating data centers in countries without full freedom of the press may be obliged to enforce restrictions on what content a media company can host in those regions. Anyone who could conceivably violate the AUP as part of the routine course of business would therefore want to gain clarity on interpretation up front — and get it in writing in an EA.

What does AUP enforcement look like?

If you’re not familiar with AUPs or why they exist and must be enforced, I encourage you to read my post “Terms of Service: from anti-spam to content takedown” first.

AUP enforcement is generally handled by a “fraud and abuse” department within a service provider, although in recent years, some service providers have adopted friendlier names, like “trust and safety”. When an enforcement action is taken, the customer is typically given a clear statement of what the violation is, any actions taken (or that will be taken within X amount of time if the violation isn’t fixed), and how to contact the provider regarding this issue. There is normally no ambiguity, although less technically-savvy customers can sometimes have difficulties understanding why what they did wrong — and in the case of automatic enforcement actions, the customer may be entirely puzzled by what they did to trigger this.

There is almost always a split in the way that enforcement is handled for customers on a CTA, vs customers on an EA. Because customers on a CTA undergo zero or minimal verification, there is no presumption that those customers are legit good actors. Indeed, some providers may assume, until proven otherwise, that such customers exist specifically to perpetuate fraud and/or abuse. Customers on an EA have effectively gone through more vetting — the account team has probably done the homework to figure out likely revenue opportunity, business model and drivers for the sale, etc. — and they also have better T&Cs, so they get the benefit of the doubt.

Consequently, CTA customers are often subject to more stringent policies and much harsher, immediate enforcement of those policies. Immediate suspension or termination is certainly possible, with relatively minimal communication. (To take a public GCP example: GCP would terminate without means to protest as recently as 2018, though that has changed. Its suspension guidelines and CTA restrictions offer clear statements of swift and significantly automated enforcement, including prevention of cryptocurrency mining for CTA customers who aren’t on invoicing, even though it’s perfectly legal.) The watchword for the cloud providers is “business risk management” when it comes to CTA customers.

Customers that are on a CTA but are spending a lot of money — and seem to be legit businesses with an established history on the platform — generally get a little more latitude in enforcement. (And if enforcement is automated, there may be a sliding threshold for automated actions based on spend history.) Similarly, customers on a CTA but who are actively negotiating an EA or engaged in the enterprise sales process may get more latitude.

Often-contrary to the handling of CTA customers, providers usually assume an EA customer who has breached the AUP has done so unintentionally. (For instance, one of the customer’s salespeople may have sent spam, or a customer VM may have been compromised and is now being used as part of a botnet.) Consequently, the provider tends to believe that what the customer needs is notification that something is wrong, education on why it’s problematic, and help in addressing the issue. EA customers are often completely spared from any automated form of policy enforcement. While business risk management is still a factor for the service provider, this is often couched politely as helping the customer avoid risk exposure for the customer’s own business.

Providers do, however, generally firmly hold the line on “the customer needs to deal with the problem”. For instance, I’ve encountered cloud customers who have said to me, “Well, my security breach isn’t so bad, and I don’t have time/resources to address this compromised VM, so I’d like more than 30 days grace to do so, how do I make my provider agree?” when the service provider has reasonably taken the stance that the breach potentially endangers others, and mandated that the customer promptly (immediately) address the breach. In many cases, the provider will offer technical assistance if necessary. Service providers vary in their response to this sort of recalcitrance and the extent of their enforcement actions. For instance, AWS normally takes actions against the narrowest feasible scope — i.e. against only the infrastructure involved in the policy violation. Broadly, cloud providers don’t punish customers for violations, but customers must do something about such violations.

Some providers have some form of variant of a “three strikes” policy, or escalating enforcement. For instance, if a customer has repeated issues — for example, it seems unable implement effective anti-spam compliance for itself, or it constantly fails to maintain effective security in a way that could impact other customers or the cloud provider’s services, or it can’t effectively moderate content it offers to the public, or it can’t prevent its employees from distributing illegally copied music using corporate cloud resources — then repeated warnings and limited enforcement actions can turn into suspensions or termination. Thus, even EA customers are essentially obliged treat every policy violation as something that they need to strive to ensure will not recur in the future. Resolution of a given violation is not evidence that the customer is in effective compliance with the agreement.

Bottom Line

It’s not unusual for entirely legitimate, well-intentioned businesses to breach the ToS or AUP, but this is normally rare; a business might do this once or twice over the course of many years. New cloud customers on a CTA may also innocently exhibit behaviors that trigger automated enforcement actions that use algorithms to look for usage patterns that may be indicative of fraud or abuse. Service providers will take enforcement actions based on the customer history, the contractual agreement, and other business-risk and customer-relationship factors.

Intent matters. Accidental breaches are likely to be treated with a great deal more kindness. If breaches recur, though, the provider is likely to want to see evidence that the business has an effective plan for preventing further such issues. Even if the customer is willing to absorb the technical, legal, or business risks associated with a violation, the service provider is likely to insist that the issue be addressed — to protect their own services, their own customers, and for the customer’s own good.

Leave a Comment