Devious Device – SLA Measurement
Today’s devious device is a playbook page that’s intentionally left blank. Omitting meaningful measurement from IT Service Level Agreements (SLAs) or leaving them to the discretion of the vendor can effectively nullify their effect along with service credits of 2%-5% of your monthly bill for a single violation up to 50% or more for serious / repeat violations (I will touch on SLA penalties and caps in a subsequent post). But the biggest impact of this trick is not to deprive the buyer of service credits, but to remove a source of leverage for demanding and receiving performance improvements or leaving an incorrigibly bad provider. As noted in the previous post on consequential damages, vendor errors can cause direct business impact orders of magnitude more than the biggest service credit obtainable, and that’s the real tangible loss from lack of measurement. This applies aross CDN SLAs, data centers, colocation, bandwidth, managed services SLAs, etc.
There’s an old saying that “you can’t manage what you can’t measure.” Unsurprisingly, this applies to SLA management. A buyer that doesn’t have access to the right measurement for a performance metric can’t manage the vendor in reaching that metric. Yet measurement is an often-overlooked portion of an IT service level agreement whose absence can negate any potential of service credits or other remedies for non-performance. Just as a sampling, we’ve seen contract boilerplates that prevent measurement by:
- Not having an SLA or metric altogether
- Saying that there’s a certain target for SLA up-time, latency or other performance metric without specifying how it will be measured
- Explicitly stating that the SLA measurement will be left to the vendor’s discretion
- Measurement delayed to when it’s convenient for the vendor. For example, requiring the vendor to receive notification from the client and acknowledge that an outage exists before the clock starts ticking on downtime (in which case, acknowledgment can be timed to coincide with resolution).
- Measuring only sub-components of the vendor’s responsibility with the highest resiliency and leaving the items that actually take effort to maintain unmeasured (e.g., we guarantee that there won’t be a failure at the core power systems, but power distribution units (PDUs) are not covered).
If your CDN, data center, or managed services vendor over-promises on its SLA (e.g. the 100% SLA up-time guarantees that are made to be broken — even Tier IV data centers can’t hit five nines), there are probably a few pennies on the order of $2K-$20K in a $1M annual contract that are lost. If the lost service credits are material to your business then your relationship probably has bigger problems than measurement. And that is actually the crux of the problem — failure to effectively measure can leave you without the data you need to terminate for cause when something seriously goes haywire. That’s when the true business impact of a poor vendor relationship — and failure to accurately measure the deficiency — is actually material to your business.
Related Posts
-
IT Services Markets Crumble -
Data Center Checklist – Force Majeure Abuse -
Data Center Vendor Playbook: Capacity-Based Power -
Perspectives on Green Grid Virtualization Whitepaper -
Avoiding The Rigged Managed Services RFP
This entry was posted on Tuesday, March 9th, 2010 at 9:42 pm and is filed under CDN & Streaming, Data Center & Colocation, Managed Services. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
While there is much in this discussion that is common sense and some value, I have to say that I am disheartened by its tone. It is unbelievably negative toward the providers. You make it seem like all providers are crooks trying to trick customers. It just isn’t so. Before moving to the advisor/client side, I spent over 20 years on the provider side – much of it selling data center outsourcing services. I can’t remember one time that we sat in a room and discussed “how can we screw this customer?”. I have always found that we entered deals with the best intentions. Of course, we wanted to steer things in a particular direction. Of course, we were in it to make a profit. But, who isn’t? It’s this kind of thinking that leads to one-sided contracts (i.e., protect yourself against everything or the provider will rob you blind). One-sided contracts lead to failed relationships.
Re: Michael Filak: I don’t think it’s that much a question of motivation. Deep down every provider think that they’ll do a great job and never fail — and that’s exactly why they don’t think the SLA is needed. But the contract language is something that holds up the sales process because it needs to be haggled over and approved by legal and finance, etc. So the shortcut is to put in something that looks like an SLA but isn’t. The thought is “we’ll never fail so there’s no harm to the client and this way we get the sale in the door this quarter.”
As to the one-sidedness of the issue, I think RampRate has a very good track record of keeping relationships together (98% or so without premature termination last time I checked) by trying to protect our clients against all threats and risks we know of – whatever the vendor motivation is. As the original post on this blog says, we’re all about having a WIN-win relationship with buyers getting the capital WIN.
When we have run into issues leading to non-renewal or termination, it’s never been an issue of too much SLA protection for the client. Prices that are out of line with market rates – sure. Vendor repositioning to different customer types – quite a bit. Outages whose pain can’t be recouped by any service credit – absolutely. But I’ve never heard “the client is just too paranoid” as motivation to walk away.
One-sided relationships in favor of the client do happen (see the consequential damages post a couple of weeks back), but if the deal is profitable or helps the vendor scale, they will find a way to make it work.