Getting good service

For top performance from your ASP, draft a comprehensive service-level agreement and hold the company to it.

By Lauren Gibbons Paul
Network World, 01/22/01

Technology Insider For Randy Gardner, hammering out the details of the service-level agreement with his application service provider took longer than converting the data in the enterprise resource planning application to be run by the ASP.

Gardner, vice president of IT for Viking Freight in San Jose, decided just about a year ago to hand off the daily operation and maintenance of back-room applications to Infinium, which hosts its own application. But before he signed a contract, he needed to make extra-sure the vendor would be able to meet the freight carrier's performance needs.

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To do that, Gardner and his IT managers took seven weeks to negotiate a finely honed document spelling out in detail the performance and network availability requirements, provisions for backups and disaster recovery, penalties for nonperformance and conditions for severance of the relationship with Infinium. "We started with their standard SLA agreement. We thought that was one-sided to the vendor," he says.

R. Gardner Gardner wasn't looking for something so onerous it would potentially threaten the viability of the ASP. "We wanted to make it fair for both sides," he says. Once the SLA was finally in place, the data conversion took only five weeks.

Just as you wouldn't marry someone you didn't trust, don't sign with an ASP unless you make absolutely sure - guaranteed by the SLA - it will provide the service you require, day after day, throughout the contract period. SLAs are in effect prenuptial agreements for the ASP relationship - and they're a big deal, to customers and providers.

SLAs are so important to potential customers that savvy ASPs, such as Qwest Cyber.Solutions, are beginning to market their services on the basis of the allegedly extra-robust SLAs they offer.

Don't fall into the trap of accepting an SLA at face value, advises John Bonello, an attorney with Washington, D.C., law firm McKenna & Cuneo. "The customer and his legal counsel should always take a very close look at exactly what they're getting," says Bonello, who consulted with the Information Technology Association of America on its recent SLA guidelines

The most important provisions in the SLA are financial reimbursement for failure to meet the designated service levels and the ability to get out of the contract without penalty if there are repeated failures (for three consecutive months, for example). Beyond these, your SLA should cover application availability, network availability, application response time, security parameters, backup and disaster recovery, tracking and reporting measures, problem resolution procedures and conditions under which the relationship would end.

Some ASP customers are offering bonuses if the ASP exceeds a certain service level, but this may not be valuable, Bonello says. Assuming you specify the service level you really need, anything incrementally above that may not be relevant.

Whatever the particulars of your SLA, don't lose sight of the fact that the end user's experience is paramount. By far the most important provision in the SLA addresses application availability and performance, says Liza Henderson, vice president of consulting for TeleChoice. Make sure the guarantee is backed up by penalties. A 10% rebate off your monthly ASP bill is a common remedy, but you may want to negotiate a stiffer penalty if your application is mission-critical.

Some IT managers try to insert a clause putting the ASP on the hook for lost business if the application goes down. This is unrealistic unless you also have a revenue-sharing provision.

"You can't expect them to pay for a lost business opportunity if they're not sharing in the revenue stream. Sometimes customers ask for too much," Henderson says.

When it comes to performance monitoring, many potential customers assume the ASP has the tools to monitor its own compliance. However, some ASPs expect their clients to use their own performance monitoring tools. After all, it may not be the best idea to have the ASP police itself. This doesn't mean you can't rely on your ASP to monitor its own performance, but you'd better make sure it has the tools and business processes in place to do so.

Or you might consider getting a third party, such as a managed services provider, to monitor the application on your behalf. Troy Tate, corporate network manager for CTS in Elkhart, Ind., likes the idea of having a company such as SilverBack Technologies handle that task. "You have to have someone watching this. You can have the ASP do it, but why would they come back and say, 'Yes, we owe you money.' It's just not in their best interests," Tate says.

According to Victor Inglese, global project manager for DaimlerChrysler Capital Services in Norwalk, Conn., an SLA is only as good as the individuals who back it up. Inglese went so far as to pore over the resumes of the Qwest personnel who would support his company's R/3 application. "I asked for their resumes to make sure they had the experience to support my needs," he says.

Some ASP customers, especially smaller companies, may find they don't have much bargaining power when it comes to altering the standard SLA offered by the ASP. "Our negotiating power was fairly light. We said, 'This is what we'd like to do.' But we didn't have much influence," says Alan Harding, vice president of operations for DataCert. com, a Houston legal software vendor that had just two employees when it contracted with Interliant. Today, DataCert has 25 employees.

No matter what size your company, it's important to be realistic when negotiating an SLA. "You can't host the application yourself for 100% availability, so what makes you think the ASP can do it - and for a cheaper price? Let's get real," Henderson says.