New service level agreements needed for software as a service

Out-Law.com notes that the software industry does not have extensive experience with SLAs because it has traditionally sold products rather than services. SLAs outline what standard of service a customer and provider agree is acceptable for the negotiated price. One key area in a SLA is the detailing of the penalties for service inferior to that anticipated. Generally compensation is given in the form of credits, which are applied as discounts in the next period of service. The SSIA report notes that it is important to draft the limits to the remedy for credits for both parties to the agreement. ‘The credit calculation must unambiguously cover the different types of failure and should clearly define compensation due for extended single outages or cumulative periods of downtime within a fixed period,’ it said. In addition, the SLA should make clear in what circumstances no credits accrue. This can be for unexpected circumstances out of the control of either party, for changes ordered by the customer outside of the original agreement and for scheduled downtimes. Full Out-Law.com report