CLOUD AND DIGITAL

DISRUPTIONS
SURVEY RESULTS
 Table of Contents
1 Survey Background 3

2 Cloud Update 10

3 Digitization Impacts 20

4 Digital Transformation 26

5 Data 31

6 Looking Around the Corner 35

Survey Background
 Key Trends Observed
This is our fourth year in a row surveying the cloud marketplace and our first time
surveying digitization. The following are just a few of the trends we have observed:

• Increasing Regulatory Environment: Data regulations were the biggest concern

(with almost half of our respondents specifically focused on data localization
updates), followed by financial regulations, and regulations on sourcing generally.

• Continued Convergence: Cloud deals continue to be completed on provider

paper with a mix of customer terms. Limitations on liability and indemnification
provisions for non-customized solutions continue to converge.

• Complexity: Our respondents use a mix of public and private cloud with multiple
vendors. When combined with the increasing regulatory environment, the cloud
marketplace is becoming increasingly complex.

© 2017 Baker & McKenzie LLP 4

 Top Respondents

© 2017 Baker & McKenzie LLP 5

 Respondents by Geography
Percentage

Consistent with our

60
past surveys, our Global (no primary
respondents represent 50 market)

a broad geographic 49
North America
distribution with half of 40
our respondents doing
EMEA
business globally 30

20 23 APAC

17
10 LatAM
9

0 2
Global (no North EMEA APAC LatAM
primary America
market)

© 2017 Baker & McKenzie LLP 6

 Respondents by Role

If you buy or sell cloud

services, do you act
primarily as a customer,
provider or both?

43% 38%
Customer

Provider
19%
Both

© 2017 Baker & McKenzie LLP 7

 Respondents by Role

Please Identify Your Role

Legal
• Half of 5%3%
5% C-Level
respondents
from legal 7% Other

• C-Suite next 50% Marketing

highest 15%
Procurement
response rate
Sales
15%
IT
© 2017 Baker & McKenzie LLP 8
 Respondents By Size
Number of Employees

Under 25
10%

Over 10,000 25-250

Respondents from larger 31% 14%
organizations are slightly
more represented, but the
overall responses are 251-1,000
14%
fairly balanced.
2,501-10,000 1,000
23% - 2,500
7%

© 2017 Baker & McKenzie LLP 9

Cloud Update
 Cloud Update

Fourth survey,
updating cloud
and looking at
what comes next.

© 2017 Baker & McKenzie LLP 11

 Public vs. Private Cloud

Does your company use

public cloud, private
Click to add text
cloud, or a combination? 9%
14% Private

Click to add text 12% Public

Combination
Click to add text 65%
Do not know

© 2017 Baker & McKenzie LLP 12

 Cloud Contract Negotiations
Our past surveys indicate that almost
80% of cloud contracts are either on Our past surveys have indicated that almost
provider’s paper or a mix of provider’s 60% of cloud contracts are negotiable.
paper with certain buyer terms.
Click to add text Do you agree or disagree?
Do you agree or disagree?

Click to add text 19%

Agree
10%
Disagree
Agree 82%
Disagree

90%

Increased number of choices for vendors, but

more limited ability to negotiate contracts.
© 2017 Baker & McKenzie LLP
 Cyber Insurance

Just over 50% of respondents

to our last survey indicated
their companies carry cyber
liability insurance.
41% Yes
Does your company carry
cyber liability insurance? 59%
No

© 2017 Baker & McKenzie LLP 14

 Limitations on Liability
Our past surveys have indicated that cloud contracts typically have 1-3x fees in
damage caps with higher caps for data security incidents. Do you agree or disagree?

In your cloud contracts

do you typically find that
consequential losses 12%
are generally excluded?
Agree

12%
Yes Disagree
88%
88% No

© 2017 Baker & McKenzie LLP 15

 Indemnification

Our past surveys indicated that cloud providers indemnify customers for willful
misconduct, IP infringement, violations of law, and data security breaches.

18%
Agree
Do you Our respondents
agree or indicated that the
disagree? 82% Disagree most heavily
negotiated
indemnification
relates to data
security breaches.
© 2017 Baker & McKenzie LLP 16
 Data Localization
Are emerging laws requiring data
localization (e.g., Russian data
residency law, China cybersecurity
Click to add text law, Indonesia's personal data
regulation) impacting your cloud
procurement/provision decisions?
36% Click to add text
50%
Yes
Click to add text
14%
No

Not yet

© 2017 Baker & McKenzie LLP 17

 Regulatory Restrictions
Do you face
regulatory restrictions
Please indicate the type of restrictions:
90
in implementing cloud
for your business or 80

your customers’ 70
businesses?
60

Yes No 50

40

30

32% 20

68% 10

0
Financial services Constraints on Data privacy Other, please
regulation government constraints specify
purchasing/use
© 2017 Baker & McKenzie LLP 18
 GDPR

Have you updated your

contractual provisions Not Yes
yet 37%
regarding data protection in
45%
light of the GDPR (the
European Union General
No
Data Protection Regulation)? 18%

© 2017 Baker & McKenzie LLP 19

Digitization Impacts
 Digitization Impacts

Has the use of digital tools changed

the way your enterprise plans its
sourcing needs?
Theoretical ability to review
agreements across divisions and
platforms, but in reality we cannot get
the various databases to coordinate.

40%
Yes Operational staff are circumventing the
sourcing and legal functions and contracting
No direct with suppliers because they believe it is
60%
quicker and digital contracts are lower risk!

© 2017 Baker & McKenzie LLP 21

 Digitization

Highest Rank
Planning
61% of respondents
indicated that the use of
Compliance Monitoring
digital tools has changed
the way their enterprise Human Resources
plans its sourcing needs.
Training

Those respondents then Payroll and Accounting

ranked the applicable
areas where digital tools Business Travel
have had an impact from
highest to lowest. Financing

Lowest Rank

© 2017 Baker & McKenzie LLP 22

 Digitization Impacts
Please rank the methods of contract
negotiation you use (higher number
indicates greater frequency)

Yes 30%
No 46% 25%
54%
20%
15%
10%
5%
Has your company’s travel and
expense policy changed in 0%
response to transformative In Person Negotiation
Remotely with Email Only
digital technology impacts?
Remotely with Teleconference
Remotely with a Combination of Tools
© 2017 Baker & McKenzie LLP 23
Remotely with Screen Sharing
 Digitization Impacts

We have centres of excellence around

Has digitization the globe that has allowed us to pool
enabled you to expertise in a single place and serve
facilitate the use of multiple markets efficiently.
centres of
excellence for
reorganization of
otherwise local Yes How do you best structure
activities? 40% staffing for transactions that
No are more digital?
60%

© 2017 Baker & McKenzie LLP 24

 Digitization Challenges

Adoption Rates – slower adoption means maintaining multiple

systems, new and legacy

Integration – the failure of various systems and functions to integrate

Digitization seamlessly reduces the value from digitization
impacts are
presenting new
opportunities Tracking and ROI – the difficulty in quantifying the actual and potential
and challenges gains makes it harder to obtain stakeholder buy-in

Rules of the Road – digitization does not always mean lower risk and
digitization may enable bypassing legal and sourcing functions

© 2017 Baker & McKenzie LLP 25

Digital
Transformation
 Digital Tools and the Supply Chain

80
Which of the following digital tools
70
has your company used to identify
60 and track its supply chain?
50

40

30

20

10

0
Dashboards/Portals Electronic Contracting RFID Other Blockchain

© 2017 Baker & McKenzie LLP 27

 Electronic Signatures

If electronic signatures or other forms of

No
8% electronic contracts are permitted, are the
Yes, always results integrated with your company’s
Yes, but by Click to add
(to the text
extent ERP or other record keeping systems?
exception permitted by
16% law)
36%
Yes, Click to add text
sometimes
(to the extent No
permitted by 40%
law) Click to add text Yes
40% 60%

Does your company permit the use of

electronic signatures to execute contracts?
© 2017 Baker & McKenzie LLP 28
 Use of Digital Tools

Has your company used any digital

tools or platforms for the management
of performance (e.g., service levels)
provided to your clients or received
from your service providers? Yes
No
48%
52%

With wide use of electronic signatures and

growing use of digital tools in governance,
what comes next?

© 2017 Baker & McKenzie LLP 29

 Digitization and Contracts

Click to add text Does your company have digital tools

in place for negotiation of standard
What is the company contracts and tracking
Clickinto add text
lawyer’s role deviations to the standard contracts?

the digitization
of the extended
Click to add text
enterprise? Yes
35%

Click to add text No

65%

© 2017 Baker & McKenzie LLP 30

 Capture Data
Percentage of Respondents
that Checked Each Response
Has your company been
able to capture and use 90
(whether by direct 80
monetization or
70
otherwise) the following
sources of data related
60
to its agreements? 50
40
30
20
10
0

© 2017 Baker & McKenzie LLP 32

 Use of Data
Does your company have a policy for
using the data generated by connected
Yes devices/equipment?
22%
Click to add text
Case-by- 60
case
No 50
53% Click to add text
25% 40
30
Click to add text 20
10
0
Yes No Do not
Does your company permit a supplier to use know
anonymized data for its own purposes?
© 2017 Baker & McKenzie LLP 33
 Data – New Risks?
The ability to capture and analyze more data creates
new opportunities, but also creates new risks
• Personal Data: New data regulations; treatment, handling, and retention of data;
employee data and employment decisions taken on the basis of that data; the use of
consumer data (e.g., online behavioral advertising)

• Intellectual Property: Who owns all of the data that has been collected? How
may the data be used? What are the best ways to monetize the data? What are
the best ways to protect the data?

• Access and Regulatory: With the data all available in one place, what is the
impact on government access rights or e-discovery access? Are there concerns in
how the data may be used now that it exists (e.g., antitrust)?

© 2017 Baker & McKenzie LLP 34

Looking Around
the Corner
 Considering the
Impacts of Digitization
How does your company consider the potential impact of disruptive
technologies in its longer term contracting planning? For each consideration
that applies, please rank them from most helpful to least helpful.

• “Looking around the corner” at leading technology trends

• Spending resources on research and development
• Reading industry publications
• Consulting with industry
Clickprofessionals
to add text or futurists
• Establishing internal think tanks
• Identifying competing/compatible businesses or startups
• Appointing external consultants
• Conducting regular (e.g., annual) technology impact assessments
• Other

© 2017 Baker & McKenzie LLP 36

 What’s next?
Machine Learning Blockchain

Do you use any contract management Is your company using Blockchain in its
solutions that use machine learning? contract management lifecycle (e.g.,
execution, settlement, and/or clearance)?
Yes
Yes
15% 8%
Do not
know
29%

No
85% Under
Consideration No
10%
53%

© 2017 Baker & McKenzie LLP 37

 Questions?
We are happy to take your
questions. Here are some of ours:

• What are the best ways to structure

legal departments as the method
and manner of contracting evolves?
• Which digitization disruptions are
likely to impact you this year? In
three years?
• Have you been able to quantify the
commercial benefits of digitization
and process automation?
• What topics did we not address that
we should have?

© 2017 Baker & McKenzie LLP 38

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