Hosted App Customers Look for SLAs with Teeth

Updated: Recent performance problems with's on-demand application service have customers checking whether or not their service-level agreements provide any real guarantees.

SAP AG doesnt believe it needs one. only offers one 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.

These are SLAs (service-level agreements), which provide a guaranteed uptime to on-demand customers—somewhere in the range of 99.5 percent and beyond monthly. They 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.

But 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.

In December, experienced a 6-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 Inc. earlier in February—have brought the question of service-level agreements to the fore.

/zimages/3/28571.gifClick here to read why customers are concerned about Salesforce.coms recent performance problems.

For customer Mark Siler, vice president of technology at Priority One Financial Services, SLAs, or rather his companys lack of one, have become a preoccupation.

After a particularly frustrating Jan. 30 outage at—and with his contract 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. "She wanted to know why I wanted one. I said to cover their outages; if they have any more, I want to be compensated. "

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 were 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."

Jame Ervin, an account manager with Dynamic Network Factory Storage Inc., experienced another 75 minute outage with on Feb. 9.

She said that because the outages are becoming "far too frequent" she will look into obtaining a SLA, something she hadnt considered last year when DNF contracted with Salesforce.

"Its one thing we didnt inquire about. Last year we probably had no outages; this year its a lot more frequent. Im sure if they run their numbers now, uptime will is probably still technically 99.9 percent, but now its occurring during business hours" said Ervin, in Hayward, Calif.

"Our organization is using Salesforce for a lot of things—production, checking our orders that go out—and it causes a lot more problems when the system goes down. Were going to look into a SLA."

Ervin will look for what kind of compensation her company can expect in the event of further outages, what contingency plans Salesforce has in place, and that its improving its offline access.

"If that could be more full featured so you could log into cases, it would be a more workable solution," she said.

Coincidentally, Salesforce is also pushing more support, at a higher premium, according to Ervin.

"Salesforce is encouraging customers to upgrade to premium technical support," she said. "It isnt really clear what benefits you get since it of course does not compensate for system downtime."

Ervin said that for $2,000 more she can get 10 hours annually of premium support from Salesforce.

"We get lots and lots of e-mails about it," Ervin said. "It says you get faster answers to your questions. Our questions are all about downtime."

/zimages/3/28571.gifBenioff blames new data center for outages. Click here to read more.

Analysts suggest that because on demand means that the actual performance of an application is outside the users control, companies need to ensure that an SLA is defined at the outset in order to wrest back some control.

Earlier this year, Liz Herbert, an analyst with Forrester Research, 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, 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. "They also want to be clear on whats required of them to get a payout if something happens, and what that payout is."

Next Page: Recompensation for downtime.