SLA picture clearing up for ASP users

Many application service providers now offer service-level agreements. The problem is most customers don't quite know what to ask for when it comes to SLAs, and service providers are still largely unsure about just what service levels they actually can guarantee.

But expect the SLA picture to become clearer in the months ahead, partly as a result of recent standards efforts. New standards guidelines will give application service providers (ASP) a place to start when creating SLAs.

SLAs have been a complicated issue for ASPs, which themselves are complicated businesses. ASPs rely on a mix of infrastructure that they own and that partners provide them, including Internet connectivity, server farms, software and the actual applications.

"A lot of my customers are very bitter about the ASP model," says Stephen Sopko, executive vice president of Contract Broker, a firm that streamlines the services contracting process. "Many have just come out of a bad experience. They've had one of those blowups and the ASP pointed to some engineering jargon and said, ‘We're not responsible.'"

"Now the market is starting to understand what the ASP model is about, realizing that there is not a lot for ASPs to differentiate on other than service levels," says Audrey Apfel, an analyst with Gartner Group.

The industry has stepped in to help ASPs figure out the SLA conundrum. In November, the ASP Industry Consortium and the Information Technology Association of America (ITAA) separately released ASP SLA guidelines. The ASP Industry Consortium's Service Level Agreement Subcommittee plans to steer industry members toward a standard SLA, while the ITAA has an online SLA library that was set up at the request of members looking for help in drafting SLAs.

The general theme from both industry groups is that ASPs should be clear about what they can and can't deliver. For example, ASPs must depend on telecommunications companies to deliver applications to customers, but don't have control over network problems. What ASPs can do, however, is promise delivery of applications by using redundant networks so that when one telco has a network problem, application services can be delivered via an alternate route.

A survey conducted by the ASP Industry Consortium found that only about 70% of ASP customers have SLAs. However, a majority of respondents agreed the best method to ensure outsourcing works is to have such a guarantee in place.

As a result, SLAs are becoming the norm among ASP offerings. Qwest Cyber.Solutions, for example, unveiled standard SLAs in October.

Called QCS Proof Positive, Qwest's SLAs offer a three-tier approach that lets customers pay for the availability they need - from 99% application availability to 99.99%. The SLAs also address response time, disaster recovery and storage utilization.

Even smaller ASPs, such as AristaSoft in San Jose, make sure customers have SLAs. "If you're offering mission-critical applications, which we are, you must have [SLAs]. There's no other way," says Lorenzo Martinelli, AristaSoft's vice president of marketing.

But he agrees with others who say that as the market matures ASPs' track records will matter more than SLAs.

In fact, Oracle Business Online is so convinced that SLAs are more time consuming than they're worth that it scrapped its SLAs last summer in exchange for a two-page satisfaction guarantee. So, if during any month a customer "is not satisfied for any reason, we will give you a 20% credit," says Business Online Vice President Don Haig.

Most ASP executives, however, expect SLAs to be a fixture. The challenge is to present the SLAs in language that spells out the business service the ASP is promising to deliver and clearly defines what the ASP is responsible for. In the past, customers expected ASPs to solve all their problems and ASPs, wanting to make the sale, were eager to deliver, observers say. Nowadays both sides are a little savvier.

It wouldn't be surprising to see customers push for SLA features such as customer-based application monitoring, rather than monthly reports generated by an ASP. This way, customers can see for themselves how applications are functioning, says Gartner's Apfel. Customers should ask for a lot more visibility into service providers, and ASPs that don't respond "aren't going to make it," she says.

Pradeep Khurana, chairman of Surebridge, an ASP in Lexington, Mass., agrees. He says the main concern for customers with any SLA should be application-level issues and response time to application problems.

What happens if an ASP doesn't meet its SLA guidelines? Most promise a credit. But when a company places processes that are integral to its business in the hands of an outsider, it's looking for steady service, not a kickback.

"Nobody goes into a contract saying, ‘Oh, great, I was able to get a 100% credit on my SLA in month four,'" says Dave Collier, a vice president for ASP USinternetworking. "They go into the contract saying, ‘I'm going to take this headache off of my plate and I'm going to worry about my core business decisions.'"

SLAs give customers assurance that an ASP has "skin in the game," he says.

Interliant's senior manager of quality, Christine Hansen, puts it this way: "The SLA is a fallback. If things aren't going well as a customer, you fall back on the SLA and say, ‘Look, you're breaching the SLA and I want penalties assessed.' The goal should be that there are no penalties - you make the service and everything is good."

John Vogus, CEO of AllBooks4Less, contracted with USinternetworking to get his online bargain book-selling business up and running. He says getting an SLA didn't matter when he chose his ASP. What drew Vogus to USinternetworking was the service provisioning infrastructure the company offered and the level of trust the company engendered.

What Vogus and other ASP end users have found is that being able to feel that you are truly in a partnership with the ASP is more important than the percentage of uptime you're guaranteed or the amount of the credit you'll get if something goes wrong.

Surebridge's Khurana says customers should use the SLA as a guide. "What's in the SLA is going to tell what kind of a company [the ASP] is. What it focuses on."