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Laura

How do you gain leverage when negotiating an SLA with a cloud vendor?

Senior Manager, Research at Info-Tech Research Group

What would you say are the key areas to pay attention to in an SLA? How much room is there to negotiate with a cloud vendor when it comes to the internal controls and processes they already have in place?

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  • May 17, 2012
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  • Guðmundur H.

    Guðmundur

    Guðmundur H.

    Solution Architect

    Is it really possible to negotiate the SLA? Or would you choose a cloud vendor by SLA? I know exactly what I want in my cloud vendor SLA :-)

  • Rich C.

    Rich

    Rich C.

    Director of IT Infrastructure at Extreme Networks

    There is some room, though you aren't likely to change the salesforce.com SLA with a single user account. It largely depends on the deal size, the company and what you are looking for.

    I'm a big believed in SLA's having meaningful penalties. Usually they boil down to "for every day you can't use our service, we'll give you 3% off of your monthly bill" which really means If it's not working, we won't charge you. Not meaningful.

    What I really want is a painful enough penalty so that they fix the problem. Something along the lines of "For each outage over 5 minutes, vendor will agree to a ten thousand dollar penalty, or develop a mutually agreed upon plan to re-mediate the issues that caused the outage"

    Now maybe 10k isn't the right number but frankly I don't want the money, I want them to have incentive to fix it. I run infrastructure and I get that sometimes projects I want to do get bumped by other business requirements, (Do we want to upgrade the 5 year old server, or run an ad in Forbes?) If you can make fixing the infrastructure a business need it makes it easier for the team running it to get funding.

    We have had some luck doing this, but it depends.

    http://scorethecloud.blogspot.com/2012/09/questions-to-ask-cloud-vendors.html are some more questions we ask cloud vendors...

  • Chad D.

    Chad

    Chad D.

    Principal Consultant at Computer Associates

    Data availability, integrity and retention are the three most often discussed subjects in a typical contract and vary widely as liability is the chief concern. When it comes to vendors, depending on their size and industry relationships, most have little room to budge when it comes to internal controls and processes as this all points back to their own expenditures and bottom line. However, if negotiations don't end up to your liking, seek a remediation clause that is comparable to a percentage of the contracts overall value. If there are multiple SLA failures throughout the term of the contract, or worse, then you can either choose not to renew the contract and find a new vendor or use those issues as leverage when negotiating new rates/terms. Larger vendors are more likely to improve their infrastructures and processes in a shorter amount of time given the amount of pressure their customers put on them. However, their are larger aspects of of SLA's to consider when it comes to the legalities of liability/ ownership around data loss or data center breaches that put companies out of compliance and can cost them billions in fines. This brings up the topic and value of private clouds and that's a whole new discussion ;)

  • Frank S.

    Frank

    Frank S.

    Sales and Business Development at Technology infrastructure and information security

    Having spent much of my career on the vendor side of the business I do not think there is a lot of meaningful penalties that a single customer can obtain if you are a user who occasionally spins up compute and storage on a "project only" basis.

    However if cloud is part of your regular operation and you are willing to negotiate a term and/or revenue commitment with the cloud operator you can negotiate SLA's but keep in mind the most important thing to a vendor is not to lose your business so an "outage" clause that allows you to terminate the contract with little or no penalty may be the best way to manage the vendor.

    Either way due diligence in better understanding how a vendor achieves their stated SLA is very important too. Some companies will offer a 99.999% uptime SLA with the understanding that their cloud offering is not engineered to achieve that level but they willing to accept the risk of paying violation penalties.

  • Henrik

    Henrik H.

    PMP, PSM, ITIL, BBA

    It is wise to think of what is agreed in terms if how the SLA fulfillment will be measured. If the vendor committs to 99,9 or 99,8 however meassured at their connection point to the whole big internet, which is common, it will say nothing about what service levels you and your users will actually percieve and you will likely spend much time with your stakeholders on what quality (availability) of service you deliver to your organisation. Compare with terms of delivery often used when buying material for your production - delivered often means that stuff has arrived at your site or to another party that can be made accountable.

  • Mike B.

    Mike

    Mike B.

    Business innovation, implementation, optimisation

    Form/join a user-group or threaten to subscribe elsewhere....

  • Sebastian R.

    Sebastian

    Sebastian R.

    Senior Cloud & Mobile Product Manager at Xyleme, Inc.

    When somebody tells me he or she is going to "negotiate SLA's" is usually because then want to increase the service levels (99,999 instead of 99,995) or the penalties in case SLA breach.

    Both things are a nosense. If your service is critical, no service provider is going to compensate your loss. And puting an extra 9 on the availability should cost a LOT more, because it should include big architectural changes.

    To gain leverage? Sure: learn a little about service management and use SLA for what they were created for: as the paper which results from a real and deep business to IT dialog (as opossed to a big stick to hit your provider)

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