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Contracting Capabilities: New Skills for effective Cloud Computing

Submitted by on 27 Mar 2013 – 15:44

By Edgar A. Whitley, Reader in Information Systems, London School of Economics and Political Science

As well as transforming the technology marketplace, cloud computing is also transforming the nature of the IT function by requiring a diverse range of new internal skills and capabilities. In particular, our research shows that cloud computing will need the development of new skills to take full advantage of the opportunities that cloud affords, namely specialised contracting capabilities.

All too often, the current IT function is seen as the “business prevention unit” of an organization. Nevertheless, most enterprises still look to technology including cloud computing as a means of driving business innovation to achieve sustainable competitive advantage.

Successfully adopting cloud computing requires a range of new skills, many of which are not found in most traditional IT departments. Some of these skills relate to the (technological) integration of cloud services to existing (internal) systems, both strategically (business systems thinkers) and operationally (architecture planners and designers, technical fixers) and these cloud skills are beginning to be taught to computing students.

Another important set of skills that is less widely supported relates to the contractual aspects of cloud computing. Cloud computing typically operates on a pay–as–you–go model with short contract cycles (weeks or months rather than years) and as a result, issues like “service level agreements” and “contract exit provisions” become increasingly strategic issues for organizations using cloud services. Unfortunately, too few IT departments currently have the capability to manage these issues effectively and this missing capability limits the effectiveness of cloud take up.

Many of these contract related issues also arise in the context of IT outsourcing and successful organizations have developed appropriate contracting capabilities. Indeed, there is considerable evidence that organizations with highly developed, often collaborative, contracting capabilities perform better than those that pay less attention to the contractual aspects of their outsourcing relationships.

The required capabilities relating to contracting in outsourcing are similar in the context of cloud computing but also have some important differences. In particular, our research has highlighted the need for four key roles that currently are rarely found in organizations looking to move to the cloud: the informed buyer, the contract facilitator, the contract monitor and the vendor developer.

The informed buyer must regularly analyze and benchmark the external market for IT and cloud services. They must lead the tendering, contracting and service management processes. Informed buying also requires an intimate knowledge of suppliers, their strategies, financial strength, and their capabilities and inabilities in different sectors, services and regions.

The contract facilitator is crucial for lubricating the relationship between supplier(s) and the business users, not least by ensuring that problems and conflicts are seen to be resolved fairly and promptly. As such it is an action–orientated capability. When outsourcing the need for this role is rarely spotted straight away. Instead, the capability tends to grow in response to on–going issues for which it emerges as an adequate response.

Contract monitoring involves making inputs into the development and maintenance of a robust contract as the basis for a sound governance framework.  The role also involves holding suppliers to account against both existing service contracts and the developing performance standards of the market. Not all potential issues and expectations can be identified at the onset of a relationship and the contract will be subject to differing interpretations as issues arise. Moreover at present there is no standard contract, only standard headings, as each cloud arrangement has its own set of issues and dynamics coupled with the relative immaturity of contracting in the current cloud environment.

The vendor developer is concerned with leveraging the long term potential for suppliers to add value, creating the ‘win–win’ situations in which the supplier increases its revenues by providing services that increase business benefits. Not properly managing the vendor can lead to sub–optimal outcomes, such as loss of technology and process knowledge, lack of innovation, over–spending and poor quality.


Table 1 Cloud contracting roles and skills profiles

Manager Role Cloud Challenge Time Horizon Description Skills profile
Informed Buyer Cloud market knowledge;

Matching business demand with cloud supply;

Cloud supplier management

Present / Future Manages the technology–cloud sourcing strategy to meet the needs of the business Business–high



Contract Facilitator Cloud service development and integration;

Cloud product manager;

Service delivery

Present Ensures the success of existing contracts for external technology–cloud services Business–medium



Contract Monitor Cloud SLAs;

Regulatory implications;

Cloud security issues

Present / Future Protects the business’s contractual position present and future Business–medium



Vendor Developer Developing cloud suppliers;

Maturing cloud relationships;

Securing future innovation and value added from cloud deployment

Future Identifies the potential added value from technology–cloud service suppliers Business–high




Table 1 summarizes these different roles and highlights their time horizons and skills profile. As can be seen from the Table, although cloud computing is traditionally seen as having a strong technological component, the contracting capabilities that effective cloud adoption will require involve a mix of technical and business skills and as such will probably need to draw on a different group of individuals than will support the technological aspects of cloud computing.



About the author

Edgar A. Whitley is a Reader in Information Systems in the Information Systems and Innovation Group of the Department of Management at the London School of Economics and Political Science. This piece is based on research undertaken with Professor Leslie Willcocks and Dr Will Venters at LSE. Further information on our cloud computing esearch can be found at

Edgar has a BSc (Econ) and a PhD in Information Systems both from the LSE and Edgar is the co–editor for the journal Information Technology & People. In addition to his work on cloud computing, Edgar also researches identity policies in the UK and other countries.

Further information about Edgar can be found at