Smart SLA Design for Your SaaS

April 7th, 2010 by Chris K.

Service Level Agreements (SLA’s) assure potential customers that your Software as a Service company will live up to your client acquisition team’s promises; however, it is also important to make promises that you can keep, and avoid making promises that are not in anyone’s best interest. Ultimately, you want your new customer to have a long and happy life on your SaaS, and trust is a key component of long-term relationships. Don’t sabotage that with a poor SLA.

SLA design: Who should be involved?

When designing an SLA, both marketing and IT should be represented. Left to its own devices, the marketing department might design an SLA that looks great in writing, but is unrealistic and ultimately doomed to cause more trouble than it is worth. On the other hand, if the IT team is left to their own devices, the SLA might be so riddled with loopholes and “it depends” caveats that it is totally unappealing to prospective clients. The marketing folks and the IT folks should put their heads together to design an SLA that strikes the right balance and is not only appealing to prospective clients, but also actually supportable in the real world.

What should you guarantee?

Typically, SLAs will guarantee most aspects of service delivery, including both technology aspects and customer service aspects. The customer service guarantees often include availability of support resources and response time on technical support requests. The technology guarantees can include error resolution time guarantees, system response time guarantees, and almost always include system availability or uptime guarantees.

Uptime guarantees

You want to make strong uptime guarantees because your SaaS will play an important role in helping your customers accomplish their objectives. A 99.5% uptime guarantee is generally the minimum guarantee you will see out there. Just to put things into perspective, 99% uptime per year equals 14 minutes and 24 seconds of downtime per day, or 87 hours, 39 minutes, and 30 seconds per year. That’s a lot of downtime. More commonly, you will see service providers guarantee either 99.9% or 99.999% uptime. 99.9% uptime equals 8 hours, 45 minutes, and 57 seconds of downtime per year, while 99.999% uptime equals 5 minutes and 42 seconds of downtime per year. Though the money lost from SLA credits is easy enough to earn back, the customer trust is not. As long as you clearly define what you include in your guarantee, you can make aggressive uptime claims like 99.999% or 100% uptime. You should make sure your uptime guarantees cover what you can control either directly or through your choice of vendors, and not any parts of the service the customer can take down through their own actions.

Account for scheduled maintenance

Customers do not like downtime, but avoiding scheduled maintenance is not the right answer. Preventative maintenance is an important part of running a good IT operation, the type that your customers can depend on. If you cannot do preventative maintenance, you almost certainly will end up doing unplanned maintenance at a time and for a duration that is much more inconvenient for your clients. What is worse is the damage that may go along with that from either lost data or a security breach. Better to prevent these issues from ever happening with scheduled maintenance. If you can afford to invest in the right amount of high availability, you can often do scheduled maintenance without any downtime. But if you cannot, it is better to have a short period of planned downtime during a maintenance window designed for the lowest possible user impact in order to prevent that big unplanned catastrophe. It is the type of responsible thing your clients would prefer you do given the alternative, so do not let a poorly designed SLA box in your ability to do the right thing.

Flow down clauses

You have service providers. They have SLA’s. Their SLA’s impact you, and therefore possibly your clients. You will want to take that into consideration when you design your own SLA. There are times where you can make promises that go beyond what your service providers are making to you, assuming you can invest resources into making it so those issues don’t impact your clients. For example, none of INetU’s bandwidth providers make a 100% uptime SLA guarantee to us. However, because we have three of them and have designed our traffic routing in a way that we can afford for any one of them to drop at any time and not have that impact our clients, we can make a promise that accounts for that. Not everyone can do this, though. If your site is served through a single hosting provider, you ought to consider the contents of that host’s SLA as you design your SLA.

Credits – know your exposure

You can approach your SLA credit structure in a few ways. One way is to design stiff penalties assuming you will rarely (if ever) have to pay them out. This is appropriate when you have designed SLA guarantees on the more conservative side of the spectrum. Another is to design lighter penalties knowing you may have to pay because you have made some bold claims.

Either way, knowing your exposure is important. If you write an ambitious SLA that stretches beyond your company’s ability to deliver and also put in stiff penalties for not meeting it, you may see your profit margins suffer.

Conclusion

Software as a Service companies make SLA promises to their clients as an important part of earning trust. Sometimes in doing this, though starting with the best of intentions, they end up disappointing both themselves and their customers. That could easily be avoided. It is possible to make your SLA an appealing aspect of your offer for prospective customers while also not putting the company’s reputation in jeopardy. This is accomplished through smart SLA design.

We hope these points help you design an SLA for your SaaS that helps you win more business while also doing right by your customers and your long-term reputation.