Firms must get tough on hosts

Users should ensure contracts include guarantees

Analysts are advising hosted software customers to ensure their contracts include guarantees against downtime. Such clauses could help to reassure firms as to the stability of hosted services in the wake of recent service interruptions.

Analyst Forrester Research last week called for Salesforce.com to offer a standard service-level agreement (SLA) with its hosted customer relationship management (CRM) subscriptions, and argued that customers need to tighten controls over performance levels of hosted software generally. “Companies should review existing contracts to better understand what guarantees exist, and negotiate for additional clauses in new contracts that include compensation for unexpected downtime,” said Forrester’s Liz Herbert.

Firms should also involve IT staff to perform due diligence on service providers, monitor performance and “get aggressive” with suppliers to ensure compensation is paid if necessary, Herbert suggested in a research note. Instead, some firms leave decisions to “line-of-business [managers who] rarely have experience in negotiating application vendor contracts, and unfortunately … don’t always push for a contractual agreement that reimburses them for unexpected outages”.

Salesforce chief executive Marc Benioff said his company offered private SLAs to customers who wanted them. “We don’t have 100 percent uptime but nobody else does,” he added. Salesforce has invested heavily to bolster failover, but Benioff said his firm has no definite plans to build a UK hosting facility. Forrester pointed out that rivals NetSuite and Salesnet offer standard SLAs based on 99.5 and 99.6 percent uptime respectively.

Other analysts backed Forrester’s recommendations for SLAs. In a blog entry this month, Butler Group’s Teresa Jones wrote: “Software as a service… means that the actual performance of the application is outside the control of the organisation using the service. One way to wrest back some control is to ensure that an SLA is defined at the outset, preferably with some recompense for SLA breaches.”

Meanwhile, Robert Bois of AMR Research said, “The reality is that many companies running software behind the firewall experience outages all the time. It’s just that Salesforce.com customers experience them all at once.” He advised prospects and customers to look carefully at SLAs, and potentially put terms in place to ensure that they are compensated if these are not met.