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Bring the penalties for breaching SLAs into line
Computer Weekly - 15/05/2007
Paul Carter Hemlin
Blake Newport
I agree with Bill Goodwin’s article “Too many SLAs don’t measure up’ — IT contracts all too often suffer from an overdose of service level agreements (SLAs).
Although I also believe that if applied correctly SLAs can be more “carrot than stick” in incentivising a supplier’s performance, does the issue not lie equally with the sums at risk for failure, which are significantly lower in IT and telecommunications contracts than in other industries?
Take a typical construction contract. Liquidated damages are often payable in the event of a delay or default in performance these are damages that are calculated and agreed at the time of entering the contract and are a genuine pre-estimate of loss. If a £15m supermarket is delayed, for instance, the contractor could find itself out of pocket for anything up to £250,000 per week.
True, the consequences of a breach of an IT service contract are less predictable and usually less absolute, but the fact remains that they are also all too often removed from the commercial norm. Is it not about time that performance, responsibility, risk, and reward went hand in hand?
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