Service Level Agreements (SLAs)

Service Level Agreements are intended to do just what the name says, help ensure that customers get the appropriate level of service promised by the manufacturer (or Service Provider). An SLA in today’s market is provided increasingly on the vendor’s hosted SaaS environment serves as something like a functional replacement for the Support Contracts you may have previously maintained on your hardware. It functions more like a traditional warranty, this product will perform to specification, if not the customer must initiate a support ticket (often using the vendor’s specified ticketing system, like Jira). Then the support ticket is assigned a severity level, Blocker, Critical, High or Low. The SLA would define what each of those classification means; and most often it is the Customer that assigns that classification when they enter the claim.

SLAs have emerged as the critical go-to reference for support with your system. As more of the compute load has moved to the cloud, and more and more specialized application services have been developed, now customers/subscribers look to their SLA. In fact in many commercial modern SaaS Agreements the SLA has not only displaced the old-school separate Support Agreement, but it has gradually also made the traditional Warranty (+ remedy that could ultimately result in termination of the Order and refund if the product was not successfully remediated during the cure period). In many modern SaaS Agreement, the concept of Acceptance has been removed, because the SaaS is generally a standard product, so the vendors do not offer a custom acceptance test. So, the SaaS Service is considered delivered and accepted the first time the customer logs in (and the entire annual revenue stream is viewed as recognized revenue, or Annual Recurring Revenue (ARR) in multi-year deals).

Challenges with Service Level Agreements (SLAs)

The challenge therefore is you need to ensure that you fully understand the profound and far-reaching roll the SLA plays in your operation and ensure that it provides adequate remedies help ensure the Service deliverable remains viable for your operation over the entire subscription term. With that in mind a few of the items we need to consider with an SLA are:

• Ensure the vendor has a duty to provide a monthly SLA report showing all downtime.
• Ensure the scheduled down time is scheduled for off-peak hours, i.e., Saturday at 2PM-5PM so as not to disrupt your operation.
• Ensure that you are satisfied with the categorization of the service claim, i.e., Blocker, Critical, Important, Minor; then associate an appropriate response time and a target remediation time.
• Ensure that your service Credit remedy is calibrated to the duration of the defect/down-time but remember you do not want it so high that vendor loses interest in a quick cure (include a NTE type limit on the Service Credit).

As you consider SLAs remember the vendor’s entire support organization typically works off the same SLA, and its operationally not always possible to offer customers custom SLAs (no one from the vendor will remember the nuance and they will be ill equipped to monitor, report, and remediate smoothly). Remember in any service agreement, particularly a long term SLA too good a deal is not a good deal may not be a good deal at all; both parties must survive the contract for an SLA to be effective.

More on Service Level Agreements (SLAs)

The Claim’s severity classification associated with that claim ticket which determines the associated duty: 1.) the Vendor’s SLA duty to that Claim; and 2.) in some (but not all) SLAs there is another vendor SLA obligation stipulated, that is the time allotted to resolve that support Claim ticket. As you might expect the vendors duty to respond to a Blocker, support ticket in which they cannot process transaction is the most stringent, of the response SLA calls for a response within 15 minutes of filing the support claim ticket. Even where SLAs don’t include a resolution time metric in the SLAs, a blocker or a critical support Claim ticket might require expedited resolution efforts, not just 9-5 type-effort; together with ongoing reporting on progress to the customer. Conversely a low Claim ticket might be addressed in a future Software release, but typically the vendor issues patches and workarounds to help the customer during the interim period. The Customer typically has a duty to promptly report a claim and typically the vendor produces an SLA performance report, this might document when the system was down.

That Vendor Performance Report is generally issued monthly. If the vendors reported SLA uptime is less than their SLA stated commitment, the Customer then has a right to submit a Service Credit claim. That Service Credit uptime is typically a % of the associated Service Fee, and typically the lower the Vendor’s SLA performance the higher the SLA credit they are required to provide the Customer. Service Credits are just that they are generally credited to the Customer’s account and applied against the next invoice; except at the termination or expiration of the Agreement, in which case a  payment for that service credit would be issued.

Often SLA service Credits are offered by the vendor as an exclusive remedy to the SLA failure. Often if a failure continues uncured or becomes a recurring issue, perhaps more than 3 times in a calendar year, the Customer is given the option of terminating the SaaS Agreement and receiving a refund for the remaining unused portion of the term + the period the service was down.

Service Level Agreements (SLAs) Attorney

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