Feeds

Software as a service needs a clear service level agreement

New model spells new legal issues

Secure remote control for conventional and virtual desktops

Software houses must create a whole new kind of service level agreement (SLA) if they start selling their software as a service rather than a product, according to a body which represents software developers.

Software developers are increasingly offering their products as an on-demand service with full support rather than simply as boxed products. But the very different nature of the delivery of software has significant legal implications, says the US-based Software & Information Industry Association (SSIA).

"For software as a service (SaaS) providers, the SLA is used to set realistic expectations for their customers," says the report, Setting Expectations in SaaS (PDF). "The SLA clearly defines the service level commitments established by the software provider and identifies their obligations to the customer and methods of reasonable compensation should these obligations not be met.

"For the SaaS customer, the SLA introduces a new level of accountability from the software provider and a means to measure and monitor service performance," it says.

The software industry does not have extensive experience with SLAs because it has traditionally sold products rather than services. In services industries, such as telecoms, they outline what standard of service a customer and provider agree is acceptable for the negotiated price.

Customers and providers alike must take care in the details of an SLA as it is a legally binding agreement. One key area is in credits. Penalties for worse service than is agreed in an SLA generally come in the form of credits, which are applied as discounts in the next period of service.

"Because of the legal nature of the SLA, it is important to carefully draft the limits to the remedy for credits for both parties to the agreement," says the SSIA report. "The credit calculation must unambiguously cover the different types of failure and should clearly define compensation due for extended single outages or cumulative periods of downtime within a fixed period.

"Unless these credits have been unmistakably defined, there is a huge risk of misinterpretation for credits due. In addition, the SLA must outline the maximum credit that will be available for any period," says the report.

It should also be made clear in what circumstances no credits will accrue. This can be for unexpected circumstances out of the control of either party, known as "force majeure", for changes ordered by the customer outside of the original agreement, and for scheduled downtimes.

The agreement should detail what hours the provider is available and when it is not, as well as the expected availability of the provided service, expressed as a percentage. The customer should agree with the service provider what kind of failures count as chronic, and how penalties will apply.

"This white paper specifically focuses on how the SaaS model requires formalised commitments between provider and consumer," said David Thomas, executive director of the SIIA software division. "It is part of the continuing story of how the SaaS model requires new and different operational methods compared to traditional software."

Copyright © 2007, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

The essential guide to IT transformation

More from The Register

next story
6 Obvious Reasons Why Facebook Will Ban This Article (Thank God)
Clampdown on clickbait ... and El Reg is OK with this
No, thank you. I will not code for the Caliphate
Some assignments, even the Bongster decline must
Kaspersky backpedals on 'done nothing wrong, nothing to fear' blather
Founder (and internet passport fan) now says privacy is precious
TROLL SLAYER Google grabs $1.3 MEEELLION in patent counter-suit
Chocolate Factory hits back at firm for suing customers
Mozilla's 'Tiles' ads debut in new Firefox nightlies
You can try turning them off and on again
Sit tight, fanbois. Apple's '$400' wearable release slips into early 2015
Sources: time to put in plenty of clock-watching for' iWatch
Facebook to let stalkers unearth buried posts with mobe search
Prepare to HAUNT your pal's back catalogue
prev story

Whitepapers

5 things you didn’t know about cloud backup
IT departments are embracing cloud backup, but there’s a lot you need to know before choosing a service provider. Learn all the critical things you need to know.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Backing up Big Data
Solving backup challenges and “protect everything from everywhere,” as we move into the era of big data management and the adoption of BYOD.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?