Managing Sourcing Relationships

There has been a lot of talk recently about SaaS and cloud computing SLAs – so I though I would share some of the discussions we have been having, both internally at ServiceFrame, and with our customers and advisors.

At the purist level, SLAs (and more specifically Service Level metrics) for SaaS should be no different to SLAs for on-premise solutions.  In fact, as Software as a Service hides the individual components of the service (servers, applications etc), it should be much more straight-forward to define End-to-End metrics for these services.  My service requirement is to have a sales tool available from 8am – 6pm, Monday to Friday – either that solution is provided or it isn’t.

There are three major challenges in moving from concept to reality in Saas SLAs.  Firstly, an SLA is no good unless the Service Provider signs up to it.  Secondly if you cannot assign clear responsibility for ensuring the metrics are met, you won’t be able to make the performance gains or cost reductions from monitoring and managing the service closely.  Finally it’s no good if you cannot measure it.

1.  Agreeing an SaaS SLA

As someone who has tried to implement an SLA with a major SaaS provider, the first task is not a trivial one.  Where the service is free, there is an understandable reluctance to commit to specific levels of service.  However, even with expensive, enterprise level software, there was a huge reluctance to make any sort of commitment.  And when an ‘SLA’ was finally produced, it was a complex calculation of system uptime – certainly not the business focussed metric we have come to expect from modern service-driven organisations.

The roots of the problem are in the SaaS concept.  In order to deliver a commodity service rather than a tailored service, the providers have consolidated their delivery platforms.  SaaS runs on large server farms, delivering a consistent service across multiple customers.  In order to provide a business-focussed service level, the provider needs to be able to prioritise service provision to match your business requirements.  This should not be beyond the realm of possibility for the sophisticated providers in the marketplace – but they won’t deliver it without concerted pressure from the client community.

2.  Agreeing responsibility for the SLA

Service providers are typically very reluctant to agree to metrics that they do not totally control.  This is changing slowly as some providers take to heart that they need to be focussed on their clients’ business outcomes.  To agree end-to-end metrics for clients, the Service providers will need to work out how to address the questions of client network or data carrier performance, and how to factor these in while remaining aligned to the client’s business needs.

3.  Measuring the SaaS SLA

There is little point in creating a service level metric without being able to measure it.  In a typical application outsource the service provider will provide the report based on data collected on the client site.  As a client of SaaS, information produced by the Service Provider is not particularly useful.  Clients will have to choose from generic measures of performance (which may not match their own experience) or specific measures, which may require substantial investment on their part.

Advice for implementing SaaS SLAs

SaaS SLAs are an evolving quantity – and can provide a real challenge to implement.  There are some general principles that we would advise in implementing an SaaS SLA

1. Identify your key value-driving services.  Push your provider for an agreed Service Level on each of these.  Make sure that you have a way of measuring it – either using yourselves, a 3^rd party or the provider’s own data
2. Don’t forget about the non-technical services.  Do you have an service level around user support?  Technical support?  Implementing configurations?
3. Consider specific Service Levels on regulatory requirements – ensuring your provider reports on these can help you prove you have taken due care of your regulatory requirements.

Way Forward – Service Management for SaaS

The SaaS industry (and cloud computing more broadly) needs to invest time and creativity in establishing how they are going to meet business’ needs for clear service commitments and for high quality reporting of whether they are meeting their requirements.  The key areas to focus are

1. How to allow for differential service levels in a multi-tenant commodity service.  Sophisticated service providers should be able to create services which are capable of being managed as a flexible, business responsive service.
2. How to make real, end-to-end commitments.  When cloud computing commitments extend from the cloud to the front door of the client’s premise – then businesses will be able to see the value their SaaS / cloud providers are delivering.  In the age of converged communications, it is not unreasonable to look to major players to partner with the communications industry in delivering on end-to-end commitments

With the establishment of cloud delivery platforms such as Microsoft’s Azure, there is an opportunity for the big players to open sophisticated service channels to both large and small providers.  Let’s hope they deliver!