Cloudy with a Chance of Meatballs Cloudy with a Chance of Meatballs? A Real-World, Practical Conversation About Cloud Computing Services Agreements John Wilson, Shannan Frisbie, Carley Andrews, K&L Gates LLP Kevin Fay, Assistant General Counsel, VMware, Inc. Association of Corporate Counsel Washington –Technology Summit June 7, 2018

Agenda Introduction of panel members Overview of cloud computing Panel discussion regarding negotiating positions of the parties and key provisions in cloud services agreements Audience Q&A klgates.com

Panel Members

Panel Members Shannan Frisbie Technology Transactions Partner K&L Gates Carley Andrews Kevin Fay Assistant General Counsel VMware, Inc. klgates.com

Cloud Terminology

What is the cloud? Fundamental characteristics Software, platform or infrastructure resources delivered over the Internet On-demand scalability and elasticity Scalability – the ability to scale up or down; offers “unlimited” resources Elasticity – the ability to provide the amount of resource which a customer needs at any given time; add or remove resources Utility/subscription billing Utility– payment based on amount of resources used Subscription – payment based on period of time klgates.com

Layers of cloud services SaaS PaaS IaaS klgates.com

cloud computing platform examples SaaS PaaS IaaS klgates.com

Differences between enterprise software and saas Technically, enterprise software is licensed, while SaaS is subscribed (unless Subscriber needs a right to copy or to do something else that is protected by copyright law) However, cloud-based agreements typically use “licensing” terminology, or are coupled with a separate license Maintenance (including requirements to send updates and upgrades) is important in an enterprise deal, but not in a SaaS deal (Provider maintains the most current version of the software for all customers) However, Service Level Agreements (SLAs) remain important to Subscribers klgates.com

Some transactions involve both Saas and enterprise software For example, Provider may provide its main offering online or “in the cloud,” but give Customers a software application to install on their computers to use certain data from the online service, or to provide some measure of offline functionality In this type of situation, you would need software license terms wrapped into the larger services agreement klgates.com

Types of Clouds

Public, private, hybrid and community clouds “Public” clouds are environments open to and shared by a variety of different Subscribers In contrast, “private” clouds are custom environments used only by one Subscriber (perhaps including related entities) Economies of scale can still be achieved, particularly for large companies; more control can be exerted, though not all risks can be contained Hybrid clouds contain aspects of both public and private clouds Community clouds are shared among several organizations but from a specific group with common goals/concerns klgates.com

Benefits of the Cloud

Benefits of the cloud: provider’s perspective The cloud allows for Providers to service multiple customers with a minimum of hardware Economy of scale, lower overhead costs Revenue / commercial advantage from data aggregation Provider only has to provide that amount of computing power necessary to meet customer demand at any point in time klgates.com

Benefits of the cloud: subscriber’s perspective Fundamental characteristics: scalable, elastic, on-demand, flexible payment More space, equipment and computing power than Subscriber otherwise could afford and maintain as enterprise hardware and software More advanced security than Subscriber might otherwise be able to provide Perhaps better organization and indexing of data; optimization of data processing Operating v. capital expense Subscriber only has to pay for what it needs, and more power and space is available on short notice if needed. klgates.com

Panel Discussion

Panel discussion Topic 1: Data Security in the Cloud Topic 2: Warranties in a Cloud Services Agreement Topic 3: Indemnification klgates.com

Panel discussion Topic 4: Limitations of Liability Topic 5: Termination Rights/Migration Assistance Topic 6: Service Level Agreements klgates.com

Panel discussion Topic 7: Other key provisions in Cloud Services Agreements Audit rights Fees Insurance Force Majeure klgates.com

Audience Q&A

Contact information Shannan Frisbie shannan.frisbie@klgates.com Carley Andrews carley.andrews@klgates.com John S. Wilson john.wilson@klgates.com Kevin Fay kfay@vmware.com klgates.com