A study released last week by 451 Research found cloud prices are still fairly low. In fact, the research firm was able to break out the actual cost per hour of cloud services for a typical company, and found costs have declined 2.25% since October of last year.

But the study also said that savings on cloud can be even more substantial for organizations that “negotiate and commit.” Smart negotiators have seen price reductions of up to 12%, the study revealed.

So what can a CIO do to ensure they get the most out of their cloud investments and get the best deal possible? 

Compare the options

First, compare cloud services providers. Cloud vendors take different approaches to licensing. Many vendors base monthly subscription fees on the number of users or seats. With others, the price depends on the amount of system resources a CIO uses. Make sure to understand which model the potential provider uses, and make sure that model is the most cost-effective fit for the organization.

Fully understand the contract

It’s also critical to be sure to understand the contract. Many cloud contracts are deliberately designed to be simple. Vendors say they can offer low cost services only by keeping things uncomplicated, pooling resources and offering services “as is” — often without any vendor representations or warranties, liability for damages, or responsibility for security or data protection. But that also means less protection for the buyer if something goes wrong.

Data security issues are particularly difficult, because failure to address them in the contract can expose a business to serious privacy law violations. If things do go wrong, it can have significant consequences for the company. Therefore, good protection up front can be a significant cost savings of its own.

Before signing the dotted line, experts suggest considering the criticality of the software, data or services involved. If the cloud services under consideration are for basic business tools or services that involve generic data, a contract with simple terms and low prices may be adequate. But if the cloud services will be used for mission critical systems that include sensitive business or personal data, experts suggest lobbying for stricter terms and getting counsel involved to ensure all the bases are covered.

Keep IT team informed

Another challenge for CIOs is to make sure others in their organization are keeping IT informed of their cloud commitments. While CIOs often know what to look for and how to negotiate a cloud contract effectively, today’s cloud vendors often go straight to the individual business unit to pitch solutions. And sometimes IT does not get wind of it until contracts have already been signed.

“The biggest failure I see is [in] organizations with a technology buying pattern that doesn't go through IT,” said Mike Pearl principal and partner at PwCs advisory practice. “People think they have the background to negotiate these kinds of contracts, but often times they don't know what they don't know.”