IBM: Simplifying the Contractual Path to the Cloud

By Charles King, Pund-IT, Inc.  January 7, 2015

Institutional dislike for lawyers is no new thing. Comments by philosophers from Plato to Jerry Seinfeld suggest that lack of affection and respect for members of the bar have been around for well over two millennia, but it could be far longer than that.

Why so? It could be the inherently adversarial nature of the profession, though experience suggests that people tend to like their own lawyers well enough, at least when they win. There’s also often a sense that the process of legalization, especially as it applies to contractual agreements, adds unnecessary complexity, opaqueness and cost to processes that were once settled with a simple handshake.

Good enough, but if that’s the case, what do you call a lawyer or lawyers who go out of their way to reduce or wholly eliminate contractual complexity? Many would call them rare, but I would call them employees of IBM.

Why this is the case came to light over the holidays, when I learned that IBM had received the 2014 Innovation Award for Operational Improvement from the International Association for Contract and Commercial Management (IACCM), a global association for commercial and contract management professionals, for “boldly and rapidly transforming its cloud computing contract process.”

What inspired the award? Under the direction of Neil Abrams, assistant general counsel at IBM, a team of company lawyers spent just two months to replace a highly complex contract that was nearly 40 pages long with a new standard two page agreement that covers all of IBM’s some 150 cloud services offerings.

Why did IBM undertake this effort? The original contract form’s complexity meant that customers’ lawyers would want to negotiate the wording, tying up lawyers on both sides in lengthy reviews and approvals.

In other words, IBM found a legal problem was inhibiting its business and assembled a strike team of lawyers to repair it.

How does IBM’s new contract compare to other cloud services agreements? According to the company, its cloud competitors require customers to review and commit to more complex agreements that are at least 5 times longer and also incorporate terms and conditions from other websites. Most companies also require a separate “professional services” contract that describes what the cloud company is going to do in detail.

The simplified IBM contract also covers services. Plus, Abrams’ team added intellectual property indemnification to the new contract, a feature most cloud providers do not include.

How have customers responded? Abrams says that review processes that once took weeks or months are now being concluded in a matter of hours or days. Plus, when negotiation does need to occur, it can be concluded more quickly. Altogether, that means that customers and their lawyers are spending less time and effort on the process, and that cloud services get up and running more quickly.

It’s also clear that, at least in IBM’s case, success breeds additional responsibility. Along with a promotion (from head lawyer for IBM software to general counsel), Abrams has been tasked with simplifying other IBM customer agreement forms.

Just a few months ago, his team wrapped up a project that replaces the company’s traditional 30+/- page product purchase agreement with a new four page contract that can be used across all of IBM’s thousands of products. In fact, the new form also allows customers to choose and stipulate the specific parts that apply to the product they want.

The success of IBM’s team may not result in the legal profession as a whole receiving more respect and love. But it is certainly likely to enable businesses to begin enjoying the benefits of IBM’s solutions more quickly and easily. In essence, by removing substantial complexity from the contractual process, IBM has brought the cloud closer and made the way to it easier for its customers.

© 2015 Pund-IT, Inc. All rights reserved.