The 2025 Vendor Due Diligence Checklist: 10 Absolute Musts | Cloud Consulting Insights

In a cloud-native ecosystem, the stakes for selecting a SaaS, PaaS, or IaaS vendor are exponentially higher. The platforms that host, process, and compute your core business data—whether AWS, Azure, GCP, Snowflake, or an enterprise AI provider like OpenAI—are now Tier-1 operational risks. This checklist is specifically for these providers, not implementation partners like consultancies. A generic, outdated vendor due diligence checklist is no longer a tool; it’s a significant liability. A miscalculation in this critical process doesn’t just lead to budget overruns; it can cause catastrophic data loss, crippling vendor lock-in, and multi-million dollar recovery efforts that threaten business continuity.

This article provides a modern, actionable vendor due diligence checklist that is not a list of suggestions but a set of non-negotiable requirements for today’s technology leaders. It’s built for the complex realities of 2025 and beyond, addressing the precise pain points that CTOs and CISOs face. You will learn the exact, hard-hitting questions to ask regarding:

Financial Viability & Exit Strategy: How to demand source-code escrows and fail vendors with less than 18 months of financial runway.
Data Sovereignty & Security: How to verify a zero-trust architecture and secure a live demo of compromise recovery.
Exit & Data Portability: How to secure contractual guarantees for data export in open formats and insert significant financial penalties for non-compliance.
Liability & SLAs: How to remove weak liability caps and enforce per-minute penalties for downtime, not just monthly credits.

Run every potential cloud platform through this gauntlet before a single contract is signed. The vendors who can pass these checks are true partners; the ones who heavily redline these requirements are your future liabilities.

1. Financial Viability & Exit Strategy

Selecting a cloud vendor is a long-term commitment, but their financial stability is never guaranteed. This part of the vendor due diligence checklist probes the vendor’s financial health and, more critically, establishes a contractually-obligated exit plan. A vendor’s financial instability becomes your operational risk. If they suddenly cease operations, your data could be held hostage, and your services could face an immediate, business-ending outage. An unplanned acquisition can be equally disastrous.

Key Vetting Actions

To mitigate these risks, your legal and finance teams must demand full transparency. This isn’t just about ensuring they can keep the lights on; it’s about understanding their long-term trajectory and investor pressures.

Financial Records: Demand the last 3 years of audited financials plus their current runway (burn rate vs. cash).
Funding & Capitalization: Scrutinize funding round details and the capitalization table. Are there any toxic investors who can force a fire sale?
The Wind-Down Clause: This is non-negotiable. Your contract must include an explicit “wind-down” clause with a 180-day data export period and source-code escrow for SaaS, and 12-month post-termination support for IaaS/PaaS.
Source-Code Escrow: For critical SaaS applications, a source-code escrow agreement is mandatory. This ensures you can maintain your instance of the software if the vendor fails.

Action Mandate: Reject any vendor refusing source-code escrow or with less than 18 months of runway, unless they are a Tier-1 hyperscaler like AWS, GCP, or Azure.

2. Data Sovereignty, Residency & Flow Mapping

Engaging a cloud vendor means entrusting them with data that is subject to a complex web of international regulations. A vendor’s compliance failure is your compliance failure, carrying risks of crippling fines and reputational damage. This part of the vendor due diligence checklist moves beyond marketing claims of “GDPR-ready” to demand hard, verifiable proof of data control.

A vendor that cannot provide a precise map of where your data lives and moves introduces unacceptable liability. You need absolute certainty about data residency to comply with GDPR, CCPA, and other regional laws. Ambiguity here is a deal-breaker.

Key Vetting Actions

Your compliance and legal teams must lead a rigorous audit of the vendor’s data handling posture, demanding evidence, not just attestations.

Data Flow Map: Require a region-by-region map detailing where your data is stored, processed, and transited—including all backups and logs.
Sub-Processor Audit: Obtain a complete list of all sub-processors with their exact geography and current SOC 2 or ISO 27001 status.
Data Transfer Agreements: Verify that Binding Corporate Rules (BCRs) or Standard Contractual Clauses (SCCs) are already executed, not something “we’ll sign later.”

Action Mandate: Fail any vendor that cannot prove EU/US data never touches China or Russia without your explicit, written opt-in.

3. Security Posture That Actually Matters

A vendor’s weak security is not just their problem; it’s a potential business-ending event for you. This section of the vendor due diligence checklist moves beyond surface-level compliance and into a rigorous, evidence-based assessment of a vendor’s ability to protect your data against modern threats. A vulnerability in their environment becomes a critical vulnerability in yours.

Key Vetting Actions

Your security team must enforce a “trust but verify” model, demanding current, verifiable proof of a mature and tested security program.

Penetration Testing & Bug Bounty: Demand the latest independent penetration test report (no older than 12 months) and review their bug bounty program scope and maximum payout.
Zero-Trust Architecture Proof: Require evidence of their zero-trust implementation, including mutual TLS (mTLS) everywhere, workload identity federation (e.g., SPIFFE/OIDC), and a policy of no shared VPCs.
Real-Time Attestation: Ask for proof of golden AMI/container immutability using tools like sigstore or cosign, and verify their commitment to a SLSA Level 3 supply chain.

Action Mandate: Require a live demo of their control plane compromise recovery process. If their Recovery Time Objective (RTO) is greater than 4 hours, it’s a failure.

4. Exit & Data Portability Guarantees

A promise to export your data upon termination is worthless without contractual teeth. Vendor lock-in often occurs not at the start of a contract but at the end, when you discover that retrieving your data in a usable format is technically difficult and prohibitively expensive. This check ensures your data remains your asset, not their hostage.

Relying solely on a vendor’s assurance of portability is a significant operational risk. Undisclosed proprietary formats or slow, manual export processes can trap you, forcing a contract renewal on unfavorable terms.

Key Vetting Actions

Your legal and technical teams must codify portability into the contract with specific, measurable, and enforceable terms.

Contractual SLA: The contract must guarantee a full data and metadata export in open formats (e.g., Parquet, Avro, Postgres dump) within 30 days of termination.
Automated Portability Tests: Demand evidence that they perform daily automated portability tests. Many vendors promise this capability, but few can prove they test it regularly.
No Proprietary Lock-In: Ensure there are no proprietary data formats that prevent easy migration. For instance, if a vendor uses a proprietary share format, require an open fallback like Apache Iceberg.

Action Mandate: Insert a liquidated damages clause of $250,000 per month for any delay in data export beyond the contractually agreed-upon 30-day window.

5. Pricing Transparency & “Shadow Cost” Audit

Unpredictable cloud billing and hidden costs are a primary source of budget overruns. Vague pricing models, surprise egress fees, and unannounced SKU changes can turn a cost-effective solution into a financial liability. As of 2025, the average surprise cloud bill can easily reach $1.8 million for large enterprises. This check is designed to eliminate that risk.

Without rigorous financial modeling and contractual caps, you are exposed to billing practices that can escalate costs uncontrollably as your usage grows. This section ensures long-term price predictability.

Key Vetting Actions

Your finance and procurement teams must force complete transparency and secure pricing guarantees for the entire contract term.

Predictable Pricing Model: Demand a 100% predictable pricing model for the next 5 years. There should be no “egress surprises” or unannounced SKU changes that affect your costs.
Contractual Guarantees: Secure commit-locked discounts and a most-favored-nation clause to ensure you always receive their best pricing.
Egress Cost Sign-Off: Require the vendor to provide and sign off on a full egress cost calculator, so you can accurately model data transfer fees.

Action Mandate: Model your Year-3 and Year-5 spend at 3x your current volume. Force the vendor to agree to a contractual cap on this modeled spend and a 60-day cure period for any accidental overages.

6. SLA, SLO & Liability That Has Teeth

A Service Level Agreement (SLA) without meaningful financial penalties is just marketing material. Vague uptime promises and liability caps that are a fraction of your annual spend offer no real protection. This part of the checklist ensures your contract has strong, enforceable guarantees for performance and assigns appropriate liability to the vendor in case of failure.

A weak SLA means you bear the financial and operational burden of the vendor’s downtime. A low liability cap means that in the event of a catastrophic data breach caused by the vendor, you absorb the multi-million dollar cost of fines, lawsuits, and remediation.

Key Vetting Actions

Your legal team must negotiate terms that reflect the true business impact of a service failure, not just the cost of the service itself.

Granular Availability SLA: Demand 99.99%+ availability with penalties calculated on a per-minute basis, not issued as small monthly credits.
Root-Cause Analysis & Audit Rights: The contract must mandate a full root-cause analysis (RCA) report within 72 hours of any major incident and grant you third-party audit rights after any outage exceeding 60 minutes.
Meaningful Liability Cap: The liability cap for data breach or data loss must be removed entirely or set to a minimum of 3x the annual contract value.

Action Mandate: Do not accept a “force majeure” clause that waives vendor liability for supply-chain attacks. The CrowdStrike incident of July 2025 set a clear precedent that vendors are responsible for their software supply chain.

7. AI/ML Governance & Training Data Rights

As AI and ML features become embedded in cloud platforms, a new set of risks has emerged around data privacy and intellectual property. It is critical to establish explicit, contractual rules governing how a vendor can use your data, particularly in the context of training their models. A vendor’s public relations promise is not a legal guarantee.

Without explicit prohibitions, a vendor could use your sensitive proprietary data to train a public model, effectively leaking your trade secrets to the world, including your competitors. Furthermore, the models and embeddings you create using their services should be your intellectual property.

Key Vetting Actions

Your legal and data governance teams must secure an AI-specific addendum to your contract that protects your data and intellectual property.

Prohibition on Training: The contract must include an explicit clause prohibiting the vendor from using any of your data to train their public models.
IP Portability: Require a contractual guarantee that any custom embeddings or fine-tuned model weights you create are owned by you and are fully exportable.
IP Indemnification: The vendor must indemnify you against any intellectual property claims that arise from your use of their embedded AI features.

Action Mandate: Require a separate, standalone AI addendum to the main contract. This addendum must include a “kill-switch” clause that allows you to immediately disable any feature that might use your data for training.

8. Sustainability & Carbon Accounting

Evaluating a vendor’s Environmental, Social, and Governance (ESG) posture is now a core component of risk management. For cloud providers, this requires a detailed audit of their carbon footprint. Vague statements about using renewable energy are no longer sufficient; you need hard data to meet your own corporate sustainability goals and investor demands.

Partnering with a vendor that engages in “greenwashing” can create significant reputational risk. As stakeholders increasingly demand transparency, your vendor’s ESG failures become your own. This check ensures their practices can withstand public scrutiny.

Key Vetting Actions

Your sustainability and procurement teams must demand verifiable data and contractual obligations related to environmental impact.

Region-Specific Metrics: Demand region-specific Power Usage Effectiveness (PUE) and carbon-intensity numbers. A company-wide average is not acceptable.
Clean Energy Commitment: The contract must include a commitment from the vendor to match your workload’s energy consumption with clean energy generated in the same grid region by 2030.

Action Mandate: Insert a clause into the contract that gives you the right to migrate your workloads to one of the vendor’s cleaner-running regions at the vendor’s expense if they fail to meet their stated carbon-reduction targets.

9. Change Management & Deprecation Policy

Unexpected API changes or the sudden deprecation of a critical feature can force unplanned, expensive engineering work on your team. A vendor’s product roadmap should not create operational emergencies for its customers. A robust, contractually obligated change management policy is essential for maintaining operational stability.

The Databricks runtime support saga of 2024 is a stark reminder of this risk. Without a long-term support guarantee, you can be forced into a costly and disruptive migration on the vendor’s timeline, not your own.

Key Vetting Actions

Your technical leadership and legal teams must secure long-term support guarantees and clear policies for managing change.

Deprecation Notice Period: The contract must mandate a minimum 24-month deprecation notice for any major versions of APIs, runtimes, or critical features.
Forced Migration Coverage: If the vendor’s notice period is less than 24 months, the contract must stipulate that they will cover the costs of your forced migration.
Customer Advisory Board (CAB) Seat: For any vendor relationship representing over $5 million in annual recurring revenue (ARR) to them, demand a seat on their customer advisory board.

Action Mandate: Automatically fail any vendor whose standard deprecation notice period is less than 18 months.

10. Kill-Switch & Incident Response Integration

In the event of a severe security incident, such as a ransomware attack that compromises your cloud tenant, your CISO needs the immediate ability to contain the threat. Relying on a support ticket to isolate your environment is unacceptably slow. Your contract must grant you direct, programmatic control to protect your assets.

The inability to instantly sever connections or suspend traffic means an attacker can continue to exfiltrate data or expand their foothold while you wait for a human response. This direct control is a non-negotiable element of modern incident response.

Key Vetting Actions

Your security operations team must verify and test these capabilities as part of any proof-of-concept (PoC) or trial.

Contractual Right to Suspend: The contract must explicitly grant your CISO the right to suspend all traffic to your tenant within 60 seconds of declaring a compromise.
Tenant Isolation API: The vendor must provide direct API access that allows you to programmatically isolate your tenant during a security event.
Joint Tabletop Exercises: Mandate an annual joint tabletop exercise to test and refine your integrated incident response plan.

Action Mandate: Test the kill-switch during the PoC. If it requires filing a support ticket or takes longer than two minutes to execute, walk away from the deal.

Make This Checklist Your Non-Negotiable Standard

This vendor due diligence checklist provides a CISO- and CTO-level framework designed to uncover hidden liabilities, expose future costs, and secure your data with contractual teeth. The era of accepting vague assurances and weak contractual language is over. The vendors who readily provide audited financials, demonstrate real-time security attestation, and agree to meaningful liability clauses are the ones architected for true partnership.

Run this verbatim in every 2025+ cloud RFP. The vendors who can’t sign it without heavy redlining are the ones that will cost you $10M+ in year four. Print it, laminate it, and hand it to your legal team on day one.

Finding vendors prepared to meet this high standard of scrutiny requires a targeted approach. CloudConsultingFirms.com provides data-driven comparisons and in-depth profiles to help you shortlist the elite cloud providers and platforms worthy of this rigorous due diligence process. Start your evaluation with partners who are already vetted for excellence at CloudConsultingFirms.com.