Service-level agreements in the cloud

As cloud services develop and mature and an increasing number of suppliers compete for business in the cloud sector, one of the key differentiators between suppliers is the service-level agreements (SLAs) they are willing to offer. For customers, SLAs can provide a degree of certainty as to the qualitative aspects of the cloud services they can expect to receive. SLAs can also assist suppliers in quantifying and mitigating risk by providing an ascertainable contractual standard to which the supplier needs to perform. This article examines the development of SLAs in respect of cloud-based services and sets out some of the key market trends and issues to consider.

A key principle of any contract is to establish clear responsibilities in relation to each party within a liability framework, providing legal certainty of recourse in the event of a breach of contract. This is simple to achieve, monitor and enforce where a contract can deal with absolute requirements, such as of confidentiality — it is easy for both parties to know when the contractual requirement has been achieved or failed. The situation is more complex where an absolute requirement is not realistic and a certain amount of failure is expected. This is particularly the case with IT and IT-related services where there is an expectation and/or understanding that it will not always ‘work’ flawlessly. This can create a problem with traditional contractual provisions, for example with a requirement for a supplier to provide services to the standard of ‘reasonable skill and care’. How much ‘failure’ would therefore be permitted in a scenario where a flawless service is not expected before a supplier has failed to achieve this contractual standard of reasonable skill and care? To avoid this uncertainty and to minimise the requirement of lawyers and courtrooms to come to conclusions on such questions, SLAs are therefore used as an objective contractual measurement mechanism for a particular aspect of a service that allows a clearly defined amount of failure before a breach of contract occurs…

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