How Good Is Your Service Level Agreement?
The following list provides tools in order to draft clauses on availability, error correction and penalties in the Service Level Agreement.
Oct 02, 2001
The subject matter of a Service Level Agreement can cover various services (e.g. maintenance, web-hosting, internet traffic). The aim of any Service Level Agreement is to ensure a maximum availability of the applications offered by the website to the user. The following list provides the tools to draft clauses on availability, error correction and penalties in the Service Level Agreement. It focuses on a Service Level Agreement, whereby the company operating a website (Customer) and the company providing services (Provider) agree on the terms of software maintenance/support. For other less technical but equally important clauses that will have an impact on the implementation and enforcement of your Service Level Agreement in Russia, please refer to the Ten Steps.
The availability rate is usually defined in %. It is calculated in relation to the total time, that the website should be available to customers (Total Time). The Total Time can be defined as the time remaining after the deduction of time for maintenance/support pursuant to the Service Level Agreement (maintenance windows and error correction within the contractual time limits) and the time, when the website was not fully (or partly) available as a result of acts or omissions that do not fall into the responsibility of the Provider (e.g. network failure, failure due to acts or omissions of the Customer, maintenance windows for hardware support, force majeure etc.).
Errors should be divided into categories according to severity (e.g. Severity 1 to Severity 3). Each of the categories should be defined (e.g. Severity 1: failure of entire applications for the user, Severity 2: partial failure or malfunctions of applications for the user, Severity 3: malfunction of the software that does not lead to reduced applications for the user).
Reaction time is the time between reporting the error and beginning of error resolution by the provider. You may also define reaction time as the time between reporting the error and error resolution.
You should explain the subject matter of the Service Level Agreement to the attorney drafting or reviewing your agreement in as much detail as possible in order to help him/her assess, whether the wording of the definitions is adequate for the purpose of the agreement.
The failure of the Provider to resolve the error reported by the Customer within the time limit agreed results in the payment of penalties. Agree on the formalities of reporting an error. Should the Customer's complaint be in writing (e-mail) or is a telephone call sufficient? To whom should the Customer address the complaint?
The amount of penalties can be calculated by reducing the provider's fees by X% for the failure to meet the availability rate by Y%. In addition, the penalty can be increased by a certain amount if the Provider does not resolve an error within a certain time frame (e.g. within one hour, within three hours, within twelve hours from reporting) in each error category. The same can be done for the failure of the provider to meet the reaction time.
However, please note, that penalties are not permitted in every country. Under Russian law, it is allowed to agree on contractual penalties. However, a penalty may be reduced by a court if the court deems that the penalty is disproportional to the consequences of the failure of the Provider.
The Service Level Agreement will become increasingly important in the future as a growing number of businesses rely heavily on the Internet for their commercial activities. The failure of networks and/or software results in severe losses to these companies and may entail serious liabilities for any provider. Therefore, Service Level Agreements should be drafted carefully and with professional help. Thoroughly explain the technical background to your attorney and be certain that your attorney understands it, otherwise you will not receive the quality of advice required for your particular needs!
2001, Dr. Christian von Wistinghausen, LL.M. for BEITEN BURKHARDT. All rights reserved. Please note that the above information is intended for your information only. Where it refers to Russian law, it is based on Russian legal acts as of July 1, 2001. The above information may not be reproduced without the written consent of BEITEN BURKHARDT except for your personal, non-commercial use. It may not be regarded as legal advice provided by BEITEN BURKHARDT or the author.
1. Be Specific
The core clauses of a Service Level Agreement refer to technical issues. The obligation of the Provider is to grant a certain technical level that will enable the Customer to operate its website. In order to translate technical performance into contractual obligation, you have to define the key technical terms. These include:- availability of the website
- errors
- reaction time / error resolution
The availability rate is usually defined in %. It is calculated in relation to the total time, that the website should be available to customers (Total Time). The Total Time can be defined as the time remaining after the deduction of time for maintenance/support pursuant to the Service Level Agreement (maintenance windows and error correction within the contractual time limits) and the time, when the website was not fully (or partly) available as a result of acts or omissions that do not fall into the responsibility of the Provider (e.g. network failure, failure due to acts or omissions of the Customer, maintenance windows for hardware support, force majeure etc.).
Errors should be divided into categories according to severity (e.g. Severity 1 to Severity 3). Each of the categories should be defined (e.g. Severity 1: failure of entire applications for the user, Severity 2: partial failure or malfunctions of applications for the user, Severity 3: malfunction of the software that does not lead to reduced applications for the user).
Reaction time is the time between reporting the error and beginning of error resolution by the provider. You may also define reaction time as the time between reporting the error and error resolution.
You should explain the subject matter of the Service Level Agreement to the attorney drafting or reviewing your agreement in as much detail as possible in order to help him/her assess, whether the wording of the definitions is adequate for the purpose of the agreement.
2. Maintenance
The provider will need a certain amount of time for the maintenance / support of the Customer software. However, during this time the user cannot usually access the software; therefore agree on the period of time for a maintenance window. The time difference to Russia will allow for a maintenance window at a time when traffic on your website is low.3. Error Correction and Penalties
In a Service Level Agreement, the provider typically pays penalties for not achieving the availability rate. The main reason for not achieving the availability rate is that the correction of errors does not occur within the time limit defined in the agreement.The failure of the Provider to resolve the error reported by the Customer within the time limit agreed results in the payment of penalties. Agree on the formalities of reporting an error. Should the Customer's complaint be in writing (e-mail) or is a telephone call sufficient? To whom should the Customer address the complaint?
The amount of penalties can be calculated by reducing the provider's fees by X% for the failure to meet the availability rate by Y%. In addition, the penalty can be increased by a certain amount if the Provider does not resolve an error within a certain time frame (e.g. within one hour, within three hours, within twelve hours from reporting) in each error category. The same can be done for the failure of the provider to meet the reaction time.
However, please note, that penalties are not permitted in every country. Under Russian law, it is allowed to agree on contractual penalties. However, a penalty may be reduced by a court if the court deems that the penalty is disproportional to the consequences of the failure of the Provider.
The Service Level Agreement will become increasingly important in the future as a growing number of businesses rely heavily on the Internet for their commercial activities. The failure of networks and/or software results in severe losses to these companies and may entail serious liabilities for any provider. Therefore, Service Level Agreements should be drafted carefully and with professional help. Thoroughly explain the technical background to your attorney and be certain that your attorney understands it, otherwise you will not receive the quality of advice required for your particular needs!
2001, Dr. Christian von Wistinghausen, LL.M. for BEITEN BURKHARDT. All rights reserved. Please note that the above information is intended for your information only. Where it refers to Russian law, it is based on Russian legal acts as of July 1, 2001. The above information may not be reproduced without the written consent of BEITEN BURKHARDT except for your personal, non-commercial use. It may not be regarded as legal advice provided by BEITEN BURKHARDT or the author.