Customers Seek SLAs With Teeth

Hosted application outages lead to calls for better performance.

SAP doesnt believe it needs one. offers one only upon request. NetSuite provides one as part of its standard license agreement but with enough wiggle room to allow for several hours of unscheduled downtime a month, on top of scheduled outages for upgrades.

SLAs (service-level agreements), which provide a guaranteed uptime rate to on-demand customers somewhere around 99.5 percent and beyond monthly, are becoming increasingly important as more and more users both sign up for the on-demand model and experience downtime as that model grows to maturity.

Many users relatively new to the on-demand model or with few problems at hand have thought little about their service agreements with vendors. However, recent issues with, often pointed to as the gold standard for on-demand CRM (customer relationship management) application service, changed all that.

For customer Mark Siler, vice president of technology at Priority One Financial Services, in St. Petersburg, Fla., SLAs—or, rather, Priority Ones lack of an agreement—have become a preoccupation.

After a particularly frustrating outage on Jan. 30 at at a time when Priority Ones contract is up for renewal, Siler contacted his account representative to inquire about obtaining an SLA.

"They first told me they dont do SLAs; then when I quoted what Marc [Benioff, CEO of] said—that they do SLAs if the customer requests it—the account executive told me she didnt have the authority to do an SLA and a vice president would have to contact me," said Siler.

Nearly two weeks later, by Feb. 8, Siler still hadnt been contacted by Hes now researching his options, looking at agreements from competitors NetSuite and SalesNet.

"NetSuite has a lot of terms with latitude for installing a new update and to be down for several hours. But what is several?" said Siler. "SalesNet said they could be down during an installation but not more than 8 hours. They capped it."

Siler said there are some similarities in both SLAs, namely that each provides compensatory guarantees should an outage last more than the stated time allowed.

SalesNet also offered Siler the opportunity to renegotiate the SLA if he doesnt like the terms.

"It does factor in that Salesforce is not willing to make any concessions when they are down," said Siler. "Theyre not willing to put in writing what their downtime guarantees are. Were putting all our eggs in their basket, but theyre not willing to guarantee it."

In December, experienced a 5-hour outage, with another overnight outage following shortly after that. Then, in January, users began complaining about a host of issues that came up after the companys Winter 06 release on Jan. 17. Those outages, combined with recent potentially game-changing on-demand announcements from competitors SAP and Oracle—SAP is offering a hybrid model for on-demand CRM, while Oracle acquired on-demand CRM provider Siebel Systems earlier in February—have brought the question of SLAs to the fore.

Earlier this year, Forrester Research analyst Liz Herbert conducted an evaluation of SLAs available with leading on-demand software providers. Herbert found that while nearly all on-demand vendors provide SLAs as standard provisions within their license agreements (with the exception of Salesforce. com), there is still some language users should be aware of.

"Customers definitely want to be clear, when theyre looking into it, whether [the SLA] is inclusive of planned downtime windows or not, and be clear what those windows are and how frequent," said Herbert in Cambridge Mass.

On-demand ERP (enterprise resource planning) provider NetSuite, for example, states that if its 99.5 percent uptime guarantee is not met in a calendar month—outside its planned downtime windows—it will credit a customer with one month of fees, with customer support costs included.

On-demand CRM provider RightNow Technologies has a service-level objective of 99.5 percent uptime and has achieved better than that since 2003."We dont have guarantees on our contracts per se," said Jason Treu, director of corporate communications at RightNow, in Bozeman, Mont. "However, if we fail to deliver on the stated time, and it is attributable to us, customers can get hosting fees returned."

Typical recompensation plans come in the form of free application time. Weaker SLAs compensate users only for downtime, which "really isnt that much," Herbert said. has invested some $50 million in two new data centers that provide failover capabilities and better safeguards for customers. The assurances are important for users such as Siler. He maintains 99.93 percent uptime. "We went through and established what we can do, as a national company operating out of a single location, to ensure uptime," said Siler. "We did just about everything you can do."

IBMs Web SLA project

* Looks to define assertions of a service provider to perform a service according to agreed-on guarantees for IT-level and business-process-level service parameters, such as response time and throughput

* Describes measures to be taken in case of deviation and failure to meet the asserted service guarantees, based on a detailed definition of the service parameters

* Expresses which party monitors the service, third parties that contribute to the measurement of metrics, supervision of guarantees or the management of deviations of service guarantees

* Defines interactions among parties supervising the Web SLA

Source: IBM WSLA project Web site