SLA Is Key Component of SaaS Deals

Ann All

Both buyers and sellers of IT services have a love/hate relationship with service level agreements, finding that unwieldy SLAs add unwanted complexity and can get in the way of constructive communication between the two sides.


That said, there are instances where SLAs are an essential component of forging a services deal. Take, for instance, software-as-a-service, a relatively new phenomenon that completely changes the way companies buy and use software.


And it's growing fast, with Gartner predicting the SaaS market will increase from $6.3 billion in 2006 to $19.3 billion by 2011.


Two things are common in such rapidly growing markets: buyers with unreasonably high expectations and a flood of new vendors -- with varying levels of ability -- eager to grab some of the growth.


Indeed, one SaaS expert says these two factors contributed to a drop in satisfaction levels among SaaS users over the past year.


So it makes sense to elevate the importance of the SLA in deals involving SaaS, as the Software & Information Association (SIIA) suggests in a recent white paper. Well-written SLAs can help providers stem buyers' unrealistic expectations and also reduce buyer anxiety by illustrating that recourse is available in the event of outages or other performance issues.


An especially thorny area, says the SIAA, is establishing how and when credits, the usual method for making up for service shortcomings, are used. The association urges software sellers to lay out the terms as "unambiguously" as possible in order to avoid "a huge risk of misinterpretation."

Add Comment      Leave a comment on this blog post
Dec 22, 2008 4:15 AM Lenny Rachitksy Lenny Rachitksy  says:
I've put together a comparison of the current state of affairs in SaaS SLAs...and things are not looking good. Very few SaaS providers offer any kind of SLA, and those that do have very weak penalties. Check it out if you're interested: Reply

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