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July 24, 2000

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ASP Contract Advice: Is Your Performance Guaranteed?

By Jennifer Maselli

uring the flurry of activity that goes along with selecting an application service provider, IT managers should set aside time to negotiate an appropriate service-level agreement. These performance guarantees keep ASPs on their toes and ensure financial penalties if their networks fail. IT managers must address a few key areas during the negotiations, says Steve Sopko, VP and chief operating officer of Agreement Design LLC, a company that negotiates performance guarantees. He offers the following tips:

Technology change and transition: Be careful to check the fine print when changing the service-level agreement within the terms of the contract. Some contracts allow ASPs to change the performance parameters of the SLA with little notice to the customer, essentially making the original agreement worthless. Sopko suggests that IT managers review any revisions and be allowed to terminate the contract without penalty if they're displeased with the new terms.

Third-party providers: Don't expect ASPs to take the fall for others. ASPs commonly deal with other providers, including telecommunications companies, software vendors, systems integrators, and data storage vendors. But even when ASPs promise to take responsibility for the entire end-to-end service, they often make sure contracts contain loopholes, Sopko says. For example, an ASP contract may stipulate full responsibility for the service, but the fine print might state that the ASP isn't responsible for an interruption in a carrier network. Customers who require their ASPs to take responsibility for the actions of third parties will end up paying more for redundancy. "Customers need to be realistic," says Sopko. "If you want a rock-solid SLA, you're going to pay for it--nothing is dirt cheap." For instance, ASP Center 7 mirrors applications for customers who can't lose transactions, and that costs more money.

Customized components: Most ASPs won't guarantee the performance of customized or altered applications. SLAs often stipulate that customers must prove that a failure isn't caused by their proprietary or custom software before the ASP will troubleshoot. And if the ASP determines that a failure was caused by customization, it can charge the customer for the troubleshooting.

Quality of customer networks: Make sure your internal infrastructure is up to par. Most ASP contracts state that a failure caused by customer infrastructure suspends the performance guarantees. Says Sopko: "I'm shocked at how many customers believe that if they can't get to an ASP application, they're entitled to a refund even if the problem is with their network."

Return to main story, "Growing Pains."

Illustration by David McLimans

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