What’s in Your SLA--Risk?What’s in Your SLA--Risk?

The customer should have plans in place for dealing with continued and repeated SLA failure. These plans should be capable of being implemented quickly.

Service Level Agreements (SLAs) define performance commitments between a service provider and the customer. SLAs specify what are the responsibilities and penalties when performance objectives are not satisfied. SLAs can apply between a communications operator or a cloud provider on one side, and the customer's IT department on the other.

If the SLA is not well written and balanced between the provider and the customer, the SLA results in a low- or no-value agreement for the customer. The financial incentive for the provider to meet the SLA is quite low or subject to clauses that prevent them from being valuable to the customer. If the penalties are too large, then the provider will have to charge higher fees to ensure it has the financial strength to pay the penalties. Poorly defined SLAs can even distort the service operations and thereby create fake goals and striving to meet useless targets.

These SLA issues were discussed in "Contract Ts & Cs: Implementation, Service, and Operational Issues," presented by Hank Levine and Laura McDonald of Levine, Blaszak, Block & Boothby law firm (lb3lawlb3law) and Joe Schmidt of TechCaliber Consulting at the "Negotiate Enterprise Communications Deals" held recently in Washington, D.C., and sponsored by CCMI. The presentation provided a number of recommendations and cautions that are of interest when negotiating and enforcing SLAs. The next conference on this subject will be held in San Diego, September 16-18. Following are some of the recommendations that were discussed:

Service Quality
Be careful during the general negotiations. If the provider does not want to bring up the SLA until the end of negotiations, be suspicious. The enterprise approach to SLA negotiations has many parts:

* Since the SLA deals with performance, be clear about how performance is measured. Define what is and is not included in the measurements. A statement covering only the network backbone does not have much value.

* Define the demarc where the provider's responsibility begins and ends. Watch for language that is general, not specific to your situation. Vagueness works to the benefit of the provider. Watch for statements like, "It is the subscriber's responsibility to know where its facilities begin."

* There are reasonable exceptions not covered by the SLA, such as natural disasters. Discover whether scheduled maintenance, emergency maintenance, network upgrades etc. that would impair performance are excluded from the SLA measurements. If so, then the availability number--say, 99.9%--will not represent the true availability that the enterprise actually experiences.

* Develop the reports that you want for monitoring the SLA. They may cost extra. Don't wait. Delayed report requests may not be honored or they can come with a hefty charge.

* Clarify the provider's role in generating the reports and your rights to use them and rely upon them.

* Determine how to escalate SLA problem(s) to obtain satisfaction.

Financial Considerations
The SLA may only offer credits and no financial payments.

* Look for procedures that will impair your ability to claim SLA credits and penalty payments.

* Ensure you understand the notifications required to report poor performance as defined by the SLA that will allow customer credits or service termination.

* Don't let the provider be the determining party on whether or not the SLA credit is due. Some SLAs put the performance decision solely at the discretion of the provider. A bad idea.

* Customers don't want performance and service failures. If these occur, then the customer must know:
--Their rights for credits and the credits' posting to the bill from the provider. Posting of credits should be within 45 days of the poor-performance notification by the customer. Some providers have been known to delay credits for six months.
--Are you covered for a substitute service replacing the poor service?
--What are the customer's rights with commitment reductions? If a service is dropped because of performance issues, does this change the fee structure, such that the fees may rise due to a lower commitment when the poor service is no longer part of the contract?

It may not be common, but the customer should have an appropriate remedy if some act or omission on the part of the provider causes a third party to sue the customer. Most SLAs absolve the providers from liability, leaving the customer to deal with the suit alone.

Exit Strategies
When a performance metric is repeatedly not met by the provider, the provider may insert a provision that only allows service termination for a specific connection, circuit, or service, while holding the customer to the contract for all other elements. The provider may not accept contract cancellation for poor SLA performance for several months before the customer can terminate the service that's behaving poorly. What this means is that the customer can be very unhappy with the provider and can prove the SLA is not satisfied, but will still have retain the service until the end of the contract.

You need to know what happens;

* If the provider fails to perform
* If and when technology changes are made that affect the SLA and the services offered
* When regulatory or compliance approval is denied or withdrawn
* If the provider changes their service description in such a way that the change hurts the customer
* If the provider terminates a service and the customer does not want to pay for the new service, or the new service does not satisfy the customer requirements
* If the provider merges with or is acquired by another provider
* If the provider divests themselves of the service

Any one of these situations may lead the customer to want to terminate the contract. The customer should be able to revise the SLA to terminate the contract if the new conditions do not satisfy the customer's business requirements.

The financial penalties and credits are never sufficient to cover the costs relating to unsatisfactory SLA performance. The customer should have plans in place for dealing with continued and repeated SLA failure. These plans should be capable of being implemented quickly.