Cloud Migration Demystified

Posted in Cybersecurity, Data protection, Technology

Migration is already underway, but some of the world’s largest organizations are still reluctant. They handle proprietary data and a staggering volume of transactions.  They want to marshal information and deliver nuanced results.  But a lack of appreciation for the Cloud’s promise, together with questions surrounding security and cost, make many CTOs and COOs cling to legacy systems.

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At the surface, the Cloud is seemingly straightforward even for occasional users; using encryption and/or password protection, individuals log on to a website, smartphone app, or similar “thin” interface. They may send an email, manage ‘Internet-of-things’ controls, reserve a seat, store a document, access a data base, or subscribe to an online tool for accounting or lead tracking.  While it’s clear that the “back office” intelligence sits someplace else, users probably don’t appreciate the architecture.

Understanding the Cloud’s capabilities and shortcomings is key to a thoughtful migration strategy. Can organizations really save money by replacing their on-premise solutions?  How do they comply with regulations around the world addressing the collection, use and transfer of personal data?  When migrating, do they retain control of their systems?  What about cyber security?  Here’s a simplified description for non-technologists!

Physical Server Farms and Virtual Capacity

The Cloud consists of millions of interconnected components and specially-configured resources that leverage them. By negotiating dark and lit fiber agreements, rights of use to subsea cables, data center leases, and related managed services, my colleagues and I help assemble the hard-wired network of computers and other facilities underpinning the Cloud.

Sophisticated programs pool capacity and various capabilities across dozens, hundreds or even thousands of servers to enable a virtual computing environment. The “-aaS” moniker – Software-, Platform- or Infrastructure-as-a-Service – denotes which combination of resources (among, for example, networks, servers, storage, runtime, applications) an organization manages for itself and which are outsourced.

The “Public Cloud” constitutes such outsourced capacity. An organization avails itself in part because the Cloud Provider does the worrying about how devices and connectivity within its sphere are employed.  An organization can self-provision such resources, facilitate broad access, and scale for volume-based offerings or other needs.  High-speed Internet access and ever-friendlier dashboards or other web page interfaces enable organizations and their users and customers to tap in.

But the Cloud’s great promise invites precautions too. For example, cheap and plentiful storage by big-name Cloud Providers should not lull focus from security and privacy measures and associated risks.  Similarly, while the Cloud promises that organizations can work with their data seamlessly and remotely without necessarily having to think about the placement, cost, or other characteristics of the hardware, country-specific data regulations override and can quickly draw back the focus to the physical location of the data.  And flexibility in employing capacity based on changing levels of need may be curtailed if an organization is subject to minimum contract terms or early termination charges.

How is the Cloud Used?

Ubiquitous storage and capacity is utilized in different ways depending on the program or task. Wide dissemination of information from a single source may be important.  A desired result could require constant updates to multiple databases.  Sometimes complex analytics are involved.

For instance, an organization must figure out how best to reach its users. Content is placed on one or many servers, depending on the popularity of the program and where it is accessed.  By using multiple servers in different locations, an organization can balance meeting the demand for content without having any physical presence in the locations where the users reside.  Remember the weather feed on nearly every website you visit?  The Cloud allows a weather website to accommodate billions of daily global hits by provisioning capacity and disseminating the latest local forecasts according to user browsing patterns.  Similarly, television or cable companies can efficiently stream live fútbol or cache content for video on demand close to users.

Collection of data is another hallmark of the Cloud, even if it’s also a challenge given the security and privacy concerns as identified below. Credit card billings, toll gate readings, stock trades, website visits, security incidents, package tracking and other commercial transactions generate enormous data.  Systems are increasingly being trained to “phone home” so that analytics can detect trends and predict outages.  Newer generation aircraft engines, for example, produce terabytes of operational details per flight!  The Cloud enables an organization to disperse its worldwide data processing and storage presence and thereby collect information for later processing.

The Cloud lets organizations harness additional tiers of capacity as needed to accommodate testing, staging, and other complex tasks requiring high throughput. For example:

  • Airlines – Carriers routinely run complex programs to manage revenue, booking, and flow of equipment, fuel, catering, crew, passengers and baggage. A blizzard or afternoon thunderstorm require even more capacity as algorithms reassign resources and notify vendors and passengers.
  • Automakers – Self-driving cars will run based on real-time processing of coordinates, landmarks, signage, road conditions, traffic and other inputs.
  • Broadcast – According to market research and consulting firm Devoncroft Partners, the Cloud reduces dependences on compression and per-channel facilities and streamlines transcoding, editing and playout.
  • Healthcare – Providers are increasingly reimbursed based on successful outcomes, benchmarking diagnoses, medical history, current medications, interventions, complications, and readmissions across entire populations.
  • Manufacturing – The Cloud has redefined product deviation analysis, brought new precision to just-in-time inventory, and effected infinite simulations for fluidics and wind.
  • Pharmaceuticals – Drug researchers now simultaneously run innumerable models with the human genome to discern the meaning of mutations, pathogen characteristics and cell susceptibility. The data can also hone precision medicine.
  • Retail – Using proximity and other management capabilities, stores know customers by analyzing their preferences.

In short, the Cloud permits an organization to exercise control of vast resources.

Migration Considerations

Organizations already imagining themselves in the Cloud navigate the important concerns associated with a migration strategy. Among numerous advantages, there are sensitivities and pitfalls too.

  • Cost – The Cloud carries an alluring narrative about cost savings. Naturally, enjoying true savings depends on numerous factors. On the one hand, old systems can be a drag on budgets. Organizations have sometimes provisioned the maximum required capacity even when it is rarely exploited. Equipment breaks or becomes outdated. Non-standard systems demand specialized personnel and custom tools. But it can be amortized and, like anything else once bought and paid for, it is bought and paid for. On the other hand, a Public Cloud theoretically allows a customer to ‘pay as you go,’ which is great insofar as it goes. However, the customer keeps paying. And paying for only the needed capacity may be belied by the sheer difficulty of managing it; savings may be mitigated by minimum commitments in Cloud contracts. It should be noted that while efficient use of the Cloud may reduce costs, it also reshapes a company’s financials — ongoing operating expense for usage fees, licensing and data center leases could be reflected in a noticeably new line item.
  • Security – For specialized data integrity or auditing needs, an enterprise may stick with a Private Cloud, which could consist of infrastructure deployment in leased raw data center space or an outsourced deal through which a Cloud Provider hosts and manages dedicated servers. But users of both Private Clouds and Public Clouds maintain cybersecurity by choosing authentication protocols, encryption levels and firewalls. Cloud Providers provide physical security, partition capacity to enable compliance with data laws, and facilitate monitoring of vulnerabilities. To be clear, they rarely guarantee data security. But even if not definitively, their offerings are increasingly viewed as more secure than individually-managed hardware. First, they can point to prominent reference accounts that require compliance with PCI credit card security standards, HIPAA security rules, and other common security regimes. Second, given that security is the biggest migration concern, many take comfort that competition among Cloud Providers drives such providers to make continual improvements.
  • Redundancy – A key risk that has evolved for organizations – especially for public companies – is whether they have adequate diversity and redundancy to ensure preservation of mission critical data. Data centers suffer outages. Cloud Providers and their customers should maintain failover solutions for disaster recovery by facilitating backup and parallel connectivity.
  • Scalability – The beauty of an outsourced solution is that resources can be quickly added or subtracted depending on the need at that moment. For example, organizations that maintain their own data on-premises may quickly need thousands of parallel computing cycles for crunching huge sets of variables. Again, minimum capacity requirements or other contract restrictions could hinder such nimbleness.
  • Service Levels – Cloud Providers offer guarantees within the range of most users’ fault tolerance and latency sensitivity. Larger organizations will find that SLAs are negotiable. In any case, organizations should keep in mind that remedies are often limited to credits against monthly recurring charges. Those with unique requirements may maintain certain functionality locally or set up different criteria in a hosted Private Cloud.
  • Physical Arrangements – While hosted Private Cloud arrangements draw on many of the same benefits available with Public Cloud offerings, data center leases demand their own attention. To avoid hidden costs, Private Clouds need to take a smart approach to determining fitting capacity, power charges, cooling, security, and connectivity. Leasing also involves allocation of expenses and risk, expansion options, and assurances of capacity portability and continuity.

Next Steps

Organizations don’t necessarily take the plunge – a thoughtful approach using available resources is important.

The evolution of Cloud computing is instructive for an organization’s planning. Historically, offsite capacity was simply used for storage, retrieval and backup.  Software-as-a-Service began as a way to alleviate the need of customers to download and maintain large software files in numerous locations.  When web transactions became rote and repetitious, the Cloud’s breadth became an obvious means to manage them.  Similarly, organizations can start their migration with the most common or resource-intensive functionality.

Incremental migration still takes time. Organizations must account for the possibility of long-term arrangements with providers and a variety of contractual contingencies that could limit their flexibility in making a quick change.  They also need a plan for defining security parameters, initially moving vast stores of data, and balancing workloads.

To avoid reinventing the wheel, there are plentiful programs to ensure proper back-office functionality. Vendors can help organizations run popular software, configure databases, move data between different Public Clouds, and leverage in-memory capabilities for better computing.  Off-the-shelf dashboards facilitate the control of systems virtually and economically.

No matter the industry, those seeking virtual availability of content, high-throughput computing, and global connectivity need to understand migration mechanics and issues.

Greenberg Traurig’s Gary M. Epstein Named in the 23rd Edition of Best Lawyers in America

Posted in Corporate & Securities, Israel

epsteingNamed in the 23rd Edition of Best Lawyers in America, Greenberg Traurig’s Gary M. Epstein has been recognized, for five consecutive years, on Best Lawyers’ “Lawyer of the Year” list.

Gary is the Managing Shareholder of the firm’s Tel Aviv office; Co-Chair of its Israel Practice and the Senior Chair of GT’s Global Corporate & Securities Practice. For more please visit our website.

 

Israel Reopens Offshore Areas to New Gas Exploration; Encourages Foreign Bidders To Participate

Posted in Environmental, Israel

shutterstock_72680935In a highly anticipated announcement, earlier today, the Petroleum Council of the Ministry of National Infrastructures, Energy, and Water Resources approved the reopening of Israel’s economic waters to new oil and gas exploration. Based on the recommendation of the Council to the Minister of Energy Yuval Steinitz, 24 offshore exploration blocks will be offered in an international bidding process by which energy companies will tender for rights to participate in exploration for oil and natural gas in Israel’s economic waters. Due to the proximity of these blocks to a large number of known major gas deposits (including the Leviathan and Tamar fields), it is expected that the bidding process will draw bidders from around the world. The Council’s recommendation was based on independent research recently commissioned by the Ministry that estimated potential undiscovered offshore resources totaling approximately 6.6 billion barrels of oil and 2,137 billion cubic meters of natural gas.

Expressed through numerous decisions and announcements, including the Government’s approval of a revised Natural Gas Regulatory Framework designed to promote investment in the sector, Israel’s government has taken a strategic decision to open up Israel’s gas exploration market to international participants. The public policy of Israel is strongly in favor of encouraging world class non-Israeli operators to enter this exciting marketplace.

Greenberg Traurig’s Energy and Natural Resources group brings together integrated, multidisciplinary teams from across the firm’s many practice areas to advise energy companies, utilities, project developers, investors, regulators, governments, and other energy industry participants in important aspects of their business. As the only international law firm with a registered office in Israel, we are positioned to support both Israeli and foreign clients in a range of legal issues relevant to world energy markets, including the upcoming offshore bidding process.

The Israel Association of Baseball Makes a Play for the 2017 World Baseball Classic

Posted in Israel

With Major League Baseball hosting the beloved All-Star Game last month, I’d like to focus on the Israel Association of Baseball (IAB), a slightly lesser-known baseball league that is headquartered close to Greenberg Traurig’s Tel Aviv office. The IAB was founded in 1986 and runs various leagues, starting as early as age six. In 2012, Israel’s national team narrowly lost out on its bid to qualify for the 2013 Worldshutterstock_253356997 Baseball Classic, and the team has already started preparing for its upcoming qualifying bid to take place later this year in Coney Island, Brooklyn for the 2017 World Baseball Classic. Our Tel Aviv office has a special connection with IAB’s junior league, as shareholder Lawrence Sternthal’s son plays third base for the IAB’s Under 14 National Team.

Being that we are a legal blog, I’d also like to call your attention to a fascinating legal analysis of the infield fly rule that can be found William S. Stevens’ seminal law-review note “The Common Law Origins of the Infield Fly Rule,” written for the 1975 University of Pennsylvania Law Review. Stevens’ article literally spawned an entire movement of legal studies of baseball, and discusses the origins of a particular situation in which the infield fly rule is called during a baseball game (for the specifics of the infield fly rule, see here). Stevens discusses the rule as an example to show how common law develops bit by bit, with changes added to address new problems that come about. Please feel free to reach out to me if you’d like to discuss any of the fine points in the article.

New Tax Implications for Israeli Citizens with Foreign Bank Accounts

Posted in Israel, Risk Management, Tax

On Aug. 1, 2016, the Israel Tax Authority announced that it has received information on over 8,000 Israeli clients with foreign bank accounts in Switzerland. The receipt of this list has major tax implications for Israeli citizens who are required to report foreign bank accounts to the Israel Tax Authority. Moreover, this will have additional tax implications from a U.S. tax perspective for dual Israeli-United States citizens who are on this list and who may not be in compliance with their U.S. reporting obligations, as it is likely that the information provided to Israel will find its way to U.S. tax authorities.

According to Greenberg Traurig shareholders Barbara Kaplan (Co-Chair, Global Tax Practice; Chair, New York Tax Practice) and Kenneth Zuckerbrot, this should be a reminder that tax secrecy is a thing of the past.  Those with undisclosed assets who are also subject to U.S. tax are at risk of multiple penalties from both Israel and the United States, and are additionally in danger of losing their U.S. passports if they owe more than $50,000 in taxes that remain unpaid.

Fortunately, there are still opportunities to mitigate this risk in the United States.  Greenberg Traurig is the only International law firm with a multidisciplinary, registered office in Tel Aviv and is positioned to support both Israeli and foreign clients in a range of legal issues, including issues other than Israeli law.

Feeding The Future World: The Israel Outlook

Posted in Israel

By 2050, the world’s population is likely to increase by more than 35 percent, to 9 billion people. To feed that population, food production will need to increase significantly, by 70 percent,[1] in the fear of growing poverty and hunger, ever scarcer natural resources, and the uncertainties of climate change.

While improvements are expected in the coming years to the global availability of and access to food, many countries will continue to struggle with undernourishment and increasingly complex forms of malnutrition. Recognizing the vulnerability of food production systems to the adverse impacts of climate change, 195 countries agreed to take measures under the Paris Agreement (COP21).[2]

Solving the world’s looming food crisis will require substantial investments in agriculture research. Innovation holds the keys to improving agriculture efficiency and productivity. Investments in innovation made over the past several decades have developed new products and procedures that have been critical to the continued growth of American agriculture, a process which must be accelerated.

Continue Reading.

GT’s Quick Guide to Section 338(h)(10) Elections

Posted in Corporate, Corporate & Securities, Tax

Section 338(h)(10) of the Internal Revenue Code can provide significant tax benefits to a buyer of 80% or more of a target corporation. A 338(h)(10) election allows a buyer of stock of an S corporation or a corporation within a consolidated group to treat the transaction as an acquisition of 100% of the assets of the target for tax purposes. The deemed asset sale for tax purposes increases the tax basis of the target’s assets which can significantly reduce the buyer’s future taxable income.

GT’s Quick Guide to Section 338(h)(10) Elections provides you with a quick reference to understanding the 338(h)(10) election, when and how it can be made and its impact on buyers and sellers.

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Materiality Provisions in Purchase Agreements

Posted in Corporate, Corporate & Securities, Mergers & Acquisitions

It is important for parties to a transaction who come from other less-litigious business environments to know that U.S. buyers and sellers operate in an environment where litigation is far more frequent, and even a single word can affect the outcome of a dispute.  We believe that the example below (just one of many that could be described) can help to introduce these concerns to a non-U.S. business, and illustrates the need for careful coordination with the company’s U.S. counsel.

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Two of the most important and highly-negotiated sections in a purchase agreement are (1) the representations and warranties section and (2) the indemnification section. In a purchase agreement in which literally even a seemingly insignificant provision can play a critical role in resolving disputes that could involve millions of dollars, it comes as no surprise that these two sections occupy so much time during the drafting of the agreement. The representation and warranties sections include statements made by the Seller regarding its business, financial conditions, assets, existing, potential or contingent liabilities, and the validity and enforceability of the transaction. Often times these are limited by dates, such as “since January 1, 2016, the Company has been in compliance with all applicable laws.” Exceptions to these statements will be listed in a separate disclosure schedule. The indemnification section spells out how post-closing disputes with respect to losses suffered as a result of any such statement being untrue are handled. For instance, what if it turns out that on April 1, 2016, the Company violated a relatively minor environmental law, and this violation was not disclosed on the disclosure schedule? Since the parties do not want to end up in litigation over the smallest matters, there will often be a basket of a certain amount of losses that must be exceeded in order for the Buyer to make a formal claim against the Seller.

Now let’s assume the violation causes the Buyer to pay $5,000 to the relevant authorities in a case where the basket is $10,000, in this event the Buyer will have no further claims to the Seller. But had there been no basket in place, the Buyer could have brought a claim against the Seller even for the $5,000. It is thus clear how the interplay between the two sections is so crucial, as failures by the Seller with respect to the representations and warranties section may lead to disputes that are handled pursuant to the indemnification section.

In the example above, the Seller limited the representation by a specific date. In addition, the Seller will often times want to further limit the representation by writing “since January 1, 2016, the Company has been in compliance in all material respects with all applicable laws.” The materiality qualifier eliminates the need to list immaterial  exceptions to the representation. The usage of the word “material” is often not used as a defined term, although in these instances the usage of the term introduces a level of speculation as to what is in fact “material.” Assuming that “material” is used in this vague manner, the question is now whether the Buyer can bring a claim for a $5,000 violation that was not disclosed (assuming there is no $10,000 limitation in place). The Seller will say that given the materiality qualifier it was not required to disclose a $5,000 violation as such violation was immaterial. The Buyer could avoid this issue by insisting on removing the materiality qualifier or by pushing to provide a dollar threshold definition of what materiality is. For instance, if the materiality threshold was $3,000, then the $5,000 violation claim would certainly be able to be brought by the Buyer. The Buyer can respond to the materiality qualifier by inserting a materiality scrape, which is a provision that typically reads as follows: “in determining whether any breach of any representation or warranty of the Seller has occurred, the term ‘material’ shall be disregarded.”  The Seller would thus be liable for any losses that occur, even if the loss was considered to have occurred due to an immaterial event, subject to any basket that is included in the purchase agreement.

The examples discussed above show the need for reviewing an agreement in its entirety to fully understand the interplay between sections. While the representations and warranties section and the indemnification section are often many pages apart, there is a direct interplay between the sections that is fundamental in understanding the agreement. Further, the usage of deliberately subjective words such as “material” add another level of complexity that may prevent the Buyer from recovering certain losses. It is no wonder that Buyers will often push back either directly or indirectly against materiality qualifiers and attempt to introduce additional language, such as the materiality scrape, that provide greater certainty to addressing post-closing claims and allocating any loss between the Seller and the Buyer.

Greenberg Traurig Tel Aviv First Foreign Office to be Ranked by Israeli Legal Directories

Posted in Corporate, General, Global, Israel, Media Coverage, Mergers & Acquisitions

Greenberg Traurig’s Tel Aviv office was recently ranked by BDICode, one of Israel’s leading legal directories . The office was included in tier 1 under the “International Commercial” practice area, and in tier 2 under the “Mergers & Acquisitions” practice area. Just several months ago, the Tel Aviv office was ranked by the other major legal directory in Israel, Dun’s 100, which included the office in tier 2 under the “International Commercial” practice area. Greenberg Traurig’s Tel Aviv office is proud to be the first and only office of an international law firm in Israel to be recognized by Israeli legal directories.

Greenberg Traurig’s Tel Aviv office is the only major international law firm with a multidisciplinary, registered office in Tel Aviv and the office serves as a gateway for Israeli businesses and entrepreneurs seeking opportunities around the world, as well as for clients exploring opportunities within Israel. While the attorneys resident in the Tel Aviv office provide a broad range of legal services in many disciplines, they do not practice Israeli law, focusing instead on the law of other jurisdictions.

Greenberg Traurig Hosts Jiangsu Provincial Department of Justice’s Israel Delegation

Posted in Event, Intellectual Property, Israel, Uncategorized

This week the Tel Aviv office hosted a delegation of senior members of the Department of Justice and Bar Association of Jiangsu Province, which included the General Director of the Justice Department of Jiangsu Province, the General Director of the Justice Bureau of the city of Nanjing, the General Director of the Justice Bureau of the city of Nantong, and the President of the Jiangsu Bar Association, among others.

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The delegation met with the Intellectual Property Committee of the Israel Bar Association and Zohar Fisher, who is in charge of the bar association’s international activities. The meeting focused on potential collaborations between Israel and Jiangsu in the field of IP protection, an intensely discussed topic in the China–Israel business ecosystem.

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The delegation then visited the Greenberg Traurig Tel Aviv office, learned of its international operations and the legal aspects of the China–Israel business relations with a focus on IP.

The visit was led by Ephraim Schmeidler who heads the China–Israel Practice.

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