Does the cloud arrangement address data privacy and security issues? One of the major concerns when using the cloud or other outsourcing is data privacy and security. Customers desire not only to protect their company’s most valuable information, but to comply with the multitude of state, federal, and even international laws that apply to businesses that store any type of “personally identifiable information.” These laws can require the encryption of, restriction of access to, and deletion after certain time periods of data, the notification of a breach to customers whose data privacy is compromised, and even the explicit use of contractual provisions with service providers surrounding privacy and security safeguards. It is important to recognize which laws apply to you (for example, certain laws apply only to specific industries such as health care or banking; other laws are particularly strict in certain geographic areas, such as California, Massachusetts, and the European Union). When reviewing the vendor agreement, consider what physical and information security is employed by the vendor. The jurisdiction in which the data is stored may implicate certain laws so you should either identify and limit where the servers can be located or make sure that you understand and can comply with the necessary laws. You should carefully review the vendor’s security measures and contractual commitments. Since vendors store data from multiple customers, you should consider conditions on their use of your data for aggregation or cross-tabulation purposes. For example, you might include provisions prohibiting the vendor’s use of your data for purposes other than providing direct services and defining such data as your “confidential information”. You should also make sure that any use of data that involves personally identifiable information not only complies with all relevant federal and state privacy laws and regulations but is also consistent with your own privacy policies and data security procedures.
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