Law firms which fail to grasp cloud computing or the risks involved in transferring data will lose clients in the IT and technology space, a leading international IT and media lawyer has said.
Freshfields Bruckhaus Deringer partner Connie Carnabuci made the claims during her presentation of a white paper, on the topic "The Cloud and US Cross-Border Risks", at a roundtable discussion in Sydney last week (12 January).
Based in Hong Kong, Carnabuci, who was previously a partner at Mallesons Stephen Jaques before joining Freshfields, heads the UK firm's IP and IT practice in Asia. Her visit to Sydney came hot on the heels of the Federal Government's draft paper into cloud computing, which was released in early January.
"One of the things the government paper says, which is very important, is that cloud computing is not a new technology; it is a new method of service delivery," Carnabuci said. "It is a new way of sourcing IT, and the real opportunity it presents to business is that it allows you to move towards a more advanced IT solution, without the traditional capital expenditure you would have to incur to build the infrastructure.
"That is where the real economic attraction lies, and that is a very big deal in a lot of emerging markets where I am working."
Cloud computing is an information and communication technology (ICT) sourcing and delivery model for enabling convenient, on-demand network access to a shared pool of configurable computing resources that can be rapidly provisionised and released with minimal management effort or service provider interaction.
According to the Department of Finance and Regulation, which produced the draft paper, Australia spends an estimated $4.3 billion per annum on ICT.
"For Australian businesses looking to go into the cloud, the three critical points to takeaway are that you need to get your regulatory analysis right," Carnabuci said. "Otherwise, all the assumptions around your business case could be invalidated. Secondly, although the cloud solution does appear attractive from a costs perspective, there are hidden costs and a lot of operational issues people don't think about up-front, as they are attracted to the headline pricing.
"Think carefully about how most effectively you can enforce a cross-border relationship."
Heather Tropman, the general counsel at Macquarie Telecom, and Matt Healy, national executive, regulatory and government at Macquarie Telecom, joined Carnabuci on the roundtable.
Tropman made the point that for a general counsel, a major question with regards to cloud computing is when to engage external legal counsel.
"Who should decide where your sensitive business data should be stored?" she said. "Should it be left to your IT Department, your external or internal legal advice, or should you get the board of directors involved?" Tropman asked.
"Have you thought about the difficulty of enforcing your rights abroad, or being held to comply with laws you are not aware of in a foreign legal system, and that could well be the upshot of off-shoring your data?"
Tropman also went on to make the point that for in-house counsel, external legal advice is very important when dealing with different regulations, such as privacy legislation, enforceability provisions and tax advice, in different jurisdictions.
"That is when you might have a panel of lawyers, or turn to a firm like Freshfields or one of the other firms that has offices in different jurisdictions ... to help get somewhat consistent advice, albeit in different markets."
Carnabuci said that the issue of providing consistent advice to clients with multi-jurisdictional issues was a major factor in companies seeking the advice of her practice group in this area, and provided a strategic advantage for global law firms.
"When you are doing a multi-jurisdictional transaction, depending on how you ask the question, you might get different answers," Carnabuci said. "So, it is useful to have a gatekeeper who you can rely on, who understands the issues from a first principles perspective and can test the answers that are coming out of less mature jurisdictions."
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