Yes, You Can Negotiate SLA Legal Terms

IT providers often argue that they can’t negotiate service level agreements (SLAs). They’re right in most cases, but with important exceptions. SLAs govern procedures for fixing broken technology, as well as credits for downtime. The provider generally can’t modify the procedures and software it uses for that support — at least, not at reasonable cost. So it can’t negotiate special SLA terms with one customer. At least, that’s the argument. If you’re the customer, you can decide whether to accept that basic premise or test it, by pushing for better service level procedures. But even if you do accept the argument and the SLA’s procedural terms, consider negotiating better SLA legal terms.

[This post highlights one of the topics to be discussed on our Oct. 20 webinar, Top Six Mistakes in Cloud Computing Contracts. See the last paragraph below.]

“Procedural” vs. “Legal” Terms in SLAs

SLA procedural terms, locked

By SLA “procedural terms,” I mean provisions governing how and when the provider responds to IT problems. That usually includes definitions of downtime, requirements for fixing severe and non-severe errors, provisions on scheduled maintenance, and more. To alter those terms, the provider would have to change its internal procedures.

That’s not the case for SLA “legal terms.” Those provisions give the customer legal rights in response to IT problems, without altering the provider’s procedures.

Identifying the SLA’s “Legal” Terms

Termination rights offer the best example. In almost every contract, the SLA can authorize termination of the contract in response to excessive downtime — e.g., more than X service level failures per quarter — without altering the provider’s internal procedures. Termination is a legal right, with no impact on procedures.

Provisions on the size of credits qualify as “legal” too. They generally require little or no revision to provider systems. (The customer itself can act on its right to higher-than-normal SLA credits, by deducting from its payments.) The same goes for warranties of functionality and terms requiring reasonable efforts to achieve service levels.

If you’re the customer, think through all the SLA improvements you’d like. Ask yourself which, if any, would require a significant change in provider procedures. And at a minimum, negotiate for those that don’t.

We’ll discuss the above in more detail — along with other topics — during our webinar on October 20: Top Six Mistakes in Cloud Computing Contracts. This post addresses a typical customer concern, but the webinar will also advise IT providers. Please join us!

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