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IT buyers frequently tell us of their struggles to craft an SLA for their WAN and wireless service contracts. Among their key challenges are responsibility for identifying non-performance and remediation mechanisms.
In the not so distant past, SLAs were often loosely defined, with few avenues of recourse for SLA non-compliance. The SLAs a carrier would commit to depended on the customer’s negotiation skills and savvy–not what the carrier was actually capable of providing. And if the SLAs carriers offered were weak, their measurement and reporting capabilities were even weaker. This is changing as internal SLAs become real metrics of IT’s performance, leading IT managers to focus on SLAs for the services they buy as a means of making sure they can meet the internal SLAs they provide to internal employees.
Corporate IT departments have become much more aggressive when negotiating with external vendors and are demanding more stringent SLAs, improved reporting capabilities, and harsher penalties. In response, carriers are beginning to offer “standard” SLAs and penalty clauses, and are improving their reporting and management tools. From our experience, these “standard” SLAs are merely a negotiation starting point. Ultimately, the goal is to ensure a contract that permits multiple “egress points,” opportunities for the telecom manager to terminate the contract without financial penalty if the carrier fails to deliver.
SLAs typically cover two distinct areas: performance and service. Performance refers to the actual performance of the service (e.g., latency, jitter, availability) whereas service covers areas related to service delivery, such as mean-time-to-restore and installation times. These areas are typically pretty straightforward and consistent across vendors; the real skill comes in crafting remediation terms that give the buyer recourse if the provider consistently fails to meet performance and SLA requirements.
A key clause that buyers should include in all SLAs is “termination on performance grounds” specifying under what scenarios the buyer can terminate the contract. Nemertes recommends that termination clauses include: replacement of the service contract with a new contract with the same vendor; merger of the service contract with another contract with the same vendor; failure to meet SLA requirements over a consistent period of time (e.g., 2 out of 3 consecutive measurement periods such as months or quarters).
Establishment of a termination clause is a far more effective means for holding a provider’s feet to the fire than simply creating a method of service credits for non-performance. Termination clauses give the buyer the ultimate recourse for non-performance – early termination of the contract.
Remember that a well-crafted SLA is your guarantee that the provider can deliver on their commitments, and to have appropriate (and effective) recourse if the provider is unable to meet those needs.
