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A Winning Combination: Software-as-Services Plus Business Consulting and Process Services
By Laurie McCabe
January 30, 2004

The service level agreement (SLA) lies at the heart of the relationship between any ASP and its customer. It defines exactly what ASPs will supply and what customers are contracting to receive — preferably in measurable terms.

Read and React
“IT has gone from being a foreign language to something that must improve a business. And that means you need tools to measure things and make rational decisions.”

—Dick Manasseri,
Director of service level management,

Give us your feedback in the ASPnews Discussion Forum

What’s surprising is that while ASP customers’ requirements have not changed much over the past years, the SLAs now demanded are often radically different that those sought in the past.

The most notable change is that a “five nines” (99.999 percent) availability guarantee is looking less and less relevant. “Customers still want high availability and uptime metrics, but the trend now is to tie SLAs to productivity improvements,” John Madden, senior analyst at Boston-based Summit Strategies, told ASPnews.

This is happening for three reasons:

  • Customers are becoming increasingly sophisticated in defining what they want from an ASP.

  • With a relatively weak economy at the moment, customers are placing more emphasis on return on investment (ROI) in any ASP deal.

  • Software tools are now available to allow the metering of SLAs according to solid business metrics.

“Over the last five or so years, customers believed that uptime meant business improvements. Now customers have realized that they may be getting five nines, but if they do not achieve the business goals that they sought from an ASP deal, then what is the point of using an ASP?” Madden said.

The Metering is the Message
As a result change of thinking, many customers want their ASP to use sophisticated metering tools to ensure they can see they are getting — and the ASP can provide — the business benefits they need. “Customers increasingly want to tie their SLAs to particular business processes that an ASP is responsible for,” Jessica Goepfert, IDC’s AppSourcing Services Research program manager, told ASPnews. “If a customer has a particular process that is carried out using an application supplied by an ASP, then they want guarantees of performance for this particular application. Customers are beginning to home in on a few key transactions and demand performance guarantees for those.”

This move has really been inevitable — it’s not unreasonable for an ASP’s customer to want a guarantee that there’s a business benefit, rather than some rather less useful IT related benefit, to be had from using the ASP. After all, it’s only IT people who are interested in IT — the rest of senior management is interested in business.

The move towards more sophisticated SLAs is also good news for service monitoring and metering tool makers, who are in a good position to fill both customers’ and ASPs’ needs.

Dick Manasseri, director of service level management at BMC, a Houston, Texas-based vendor of quality-of-service monitoring software, told ASPnews that customers are now able to be far more precise in the business benefits that they can specify that they want. “It’s obviously important that a system is available, but underlying this is the requirement for a certain level of productivity, a minimum responsiveness or performance level. A customer wants to be able to say ‘these representative transactions must be done in x seconds.'”

BMC tools can be used to measure response times at different locations and times for various transactions, and then specify what needs to be done by an ASP to improve performance. “This paves the way for service level agreements to be drawn up. IT has gone from being a foreign language to something that must improve a business. And that means you need tools to measure things and make rational decisions.”

New tools can also make it easier for an ASP to supply exactly what a customer wants from a more business-oriented SLA. “The ability to gather customer traffic data in real-time is necessary to have a clear understanding of what is going on in a system,” said Ed Birss, CEO of Sunnyvale, Calif.-based infrastructure performance measurement software maker Peakstone. “ASP customers have a set of requirements now that include traffic issues, and we are seeing an increased desire on the part of ASPs to have new sources of information so they can really understand the behavior of their systems.”

The SLA of Tomorrow
So have ASP customers now figured out what they want in an SLA, or are we still only part way up the learning curve? Summit Strategies’ Madden thinks there’s still plenty yet to learn. “In the future perhaps we’ll see slicing and dicing of SLAs to specific metrics depending on the particular apps involved. If there is a move to utility services and architectures and ubiquitous computing — and it seems the industry is heading that way — we will need new SLAs, many of which we simply haven’t thought of yet.”

Do you have a comment or question about this article or the ASP industry in general? Speak out in the ASP Discussion Forum.


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