Importance of Service Level Agreements for the Cloud

Posted on April 30, 2011 by Sam Conforti

 

Thomas Trappler is Director, UCLA Software Licensing, UCLA. He is the Manager (and I believe he is also the Founding Member) of “Software Licensing Professionals”, a group on LinkedIn which I am a member. Tom has a wealth of experience and his articles and commentary have been an excellent resource for me during my research on Cloud Computing and many other software licensing related topics. His current article in Computerworld entitled “The Cloud Contract Adviser: Service-level agreements” will be very helpful to those of you considering moving some or all of your computing to the Cloud.

He begins his article by breaking down SaaS, IaaS, and PaaS to its simplest terms, and that is “Service”. As Trappler points out, the key concern for the licensee should be “Uptime”. The service availability should be memorialized in the contract itself. Trappler cautions us about the vendor’s claims of 99.9% uptime. As he comments, the initial impression to the licensee to such a claim is favorable, but as the cliché goes, read the fine print. Such service availability and the vendor’s responsibility for downtime are not always computed as part of the 99.9% claims if your internet connection is lost. Also not included in the percentage is scheduled maintenance. Trappler also suggests that in the contract definition of service availability the percentage can be affected if it is measured by consecutive minutes or such downtime is spread over a certain period of time. Any or all of these components can be included in the contract definition of service availability or downtime.

Trappler’s section in his article on the remedies built into the contract is very useful. He states that this is the place where the draftsman builds in certain incentives to help assure compliance with the 99.9% uptime claims. These incentives usually come in the form of credits to be applied to future billings. I’ve been practicing law for close to 25 years and I have a particular angst when I hear my opposing counsel say something like “I’ve never heard of that before”, but I have to admit I was not familiar with one of the suggested remedies, as Trappler labels it, the reputational remedy. Apparently, one might consider including a remedy which would require the vendor to take out a full page ad in a newspaper of general circulation announcing missed service levels. A strong motivator, no doubt; but getting it into the contract itself might be a bit tricky.

 

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The Paradigm Shift: Software Execs Move to the Cloud

Posted on April 2, 2011 by Sam Conforti

 

Kamesh Pemmaraju heads cloud computing research for Sand Hill Group. He writes a weekly blog, Leaders in the Cloud for weekly updates on developments in the cloud market. In an opinion piece for Sand Hill entitled Cloud Leaders Face a Changing Tide he reports to us on the latest Sand Hill survey of 100 software CEOs and senior executives and their responses regarding their firms expected revenues from Cloud Computing for the next few years, their customer’s attitudes and readiness to adopt Cloud Computing, and which products and services seem to be catching hold.   What appears to be obvious to Pemmaraju from the results of the survey is that these vendor’s customers want to be in the Cloud and the execs recognize this demand and no longer expect their customers to accept the existing products for sale. The survey respondents seem to feel that the global recession is ending and they expect considerable growth in the Cloud Computing market space.

85% of the respondents already had cloud products and service offerings ready for sale to their customers and 43% expect that Cloud Computing sales will make up the majority of their sales in the next 5 years:

The survey showed an interesting dichotomy between small firms (i.e. revenues of $250M or less) and large firms. The larger firms will grow their revenue from Cloud Computing but at a much slower pace in the next 5 years:

Pemmaraju identifies the key to success for these software vendors are to recognize the value their customers see in the applications and the platforms on which these applications are developed. Hence these software vendors “also need to create platforms to attract developers to extend and build new applications.” The concerns from all parties are very real and consist of:

·         PaaS (Platform as a Service) is still relatively new and unproven

·         Enterprise customers are stocked with on-premises development tools

·         Customers want to avoid being locked into one vendor

Although SaaS is the primary model today, Pemmaraju reports that the surveys show that PaaS is the choice for most respondents in the next 3 years:

The paradigm is shifting once again and as the software vendors learn and adapt there will be many missteps along the way. Pemmaraju sums it up nicely in his opinion piece:

“But as customers move away from traditional licensing models, software vendors—particularly the incumbents—face challenges in adjusting their products, go-to-market strategies and pricing models. How can they move towards cloud computing without cannibalizing their existing product revenues? Even the metrics or methods that software firms use to track their business are evolving rapidly. Moreover, nearly 50 percent of the executives surveyed said the cloud offerings today are not yet ready for enterprise use, and the current lack of standards is a growth inhibitor.”

 

 

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