June 9, 2016

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Service-level Agreements in the Cloud: Immaterial?

Yes, our beloved Service Level Agreements (SLAs) are immaterial in the cloud. Service Level Agreements have ruled our hearts until now, ever since the old MIS days. They got all our attention and prominence with the proliferation of ITIL in the IT service management world, and even became an obsessive theme in the outsourcing contracts. Although most SLAs are meaningless today in the traditional ITSM framework, I would like to dwell here on a specific point: the inconsequentiality of SLAs in the cloud.  

If you are defining SLAs and planning the SLA management process while buying cloud services, then you are wasting both your time as well as the provider’s. The reason is simple. Cloud service providers are not designing their service specifically for you; rather, they are offering ready-made services which provide the desired level of availability and performance that satisfy the requirements of contemporary businesses and allows them to stay in the business. It would, therefore, be futile for you to seek higher availability or performance in contractual SLAs. So, what then should you do?

First, learn what not to do. Let’s start with negotiations. If you are negotiating SLAs with a ‘leader’ provider, you will not succeed. Similarly, if you are negotiating with a ‘contender’ provider, they will sign anything to win the business—no matter how unrealistic the SLAs are.

Defining SLAs is attempting to solve a technology problem with legal tools. Unfortunately, a legal solution cannot give you more availability than a technology solution can. Seeking a ‘flexible’ provider, therefore, does not really make the sense other than ‘self-satisfaction’ of achieving an immaterial win. If you seek opinion from your legal and financial departments on SLA negotiations, you will get thumbs up from them. They will appreciate the idea because this is what will prove their value in the process, regardless of whether it actually makes sense or not.

Yet another misleading concept is including penalties in SLAs as incentive for improvement. Remember, penalties again are not technology solutions that can improve SLAs. For instance, if penalties are associated with outage and is linked as a billing loss to the provider, then the provider has strong reason to restore the service as quickly as possible. Moreover, if you think that your penalties are making the provider to work harder, that is just an illusion—the potential penalty amount is already buffered in the price.

So, if pursuing SLAs in the cloud is a wasteful approach then what is the right approach? The right approach is to focus on designing the right architecture of the cloud service, so that it specifically suits your purposes. You should evaluate the available options from the provider and configure them suitably to meet your requirements. This includes building redundancy and elasticity in your architecture, so as to ensure sustained availability and performance. With this in place, the negotiations will be confined to just the pricing and discount aspects of the contract. That’s a much simpler job for both the parties, isn’t it?