I get SLAs now. Duh.
October 11, 2007
Ok, so I guess I’m a total n00b. In hindsight, SLAs make a lot of sense after all. The whole point isn’t to compensate SmugMug for our loss, it’s to make it unprofitable for the service provider to keep making the same mistakes.
In other words, let’s say Amazon’s margins on S3 are 15%. (I have no data, I’m just picking that number out of the air). If Amazon has a serious problem during a month, they have to cough up 25% to all their customers. In other words, they lose 10% instead of make 15%.
That’s pretty major incentive – and it now totally makes sense why SLAs are so highly valued.
Carry on.
Categories: amazon, business, datacenter
SmugMug's Don MacAskill 
Hi Don —
Thats great from a holistic point of view. However, I still side with your earlier post that in the day to day life of an datacenter manager, refund based SLA’s are close to worthless when you’re adding up your losses in revenue, and customer confidence. BUT please folks remember, SLA’s are just another part of the contract, and are generally quite negotiable. If you are a desirable customer to a service provider, they are often willing to work with you on an SLA that meets your needs. My approach:
I don’t dicker with the vendors chosen SLA numbers (fighting for 99.999% versuses 99.995% uptime for example), but I instead write additions to the SLA that will hold them to their own stated goals. If they have more than X violations of their own SLA in Y months/days/Megabytes/years/iops/etc, we reserve the right to cancel the contract without penalty, with 30 days written notice, blah blah blah.
I’m obviously a noob in this area as well, not really caring much about Amazon’s SLA. And neither had I looked at it from the other side as you have in this post.
But….if a company will only work hard on achieving performance because they might lose some $$$ then they’re not a company to be with in the first place. I can see that losing $$$ is an incentive, but a good company doesn’t need it, they’re already doing the best job they possibly can.
All pie in the sky I know, and with so many companies run by accountants & bankers (ie people who don’t give a damn what the company does as long as it makes a buck) I guess an SLA at least appears to keep them honest.
Thanks for the great blog, you put me (and about a million others) onto S3 in the 1st place, they should be providing Smugmug with free service š
Aaron.
http://www.panedia.com
Unfortunately, it doesn’t work as well with larger hosting providers or telecommunication companies.
The chance of something going wrong that month with their WHOLE network is extremely slim. Usually, a problem will only affect a small percentage of their whole customer base, so they’ll only lose a bit of money.
So I when dealing with a large company, if you are a small customer, SLAs are usually meaningless. They can afford to have frequent short outages and no amount of refund is going to make that OK with you and your own customers.
This was great last time, looking forward to it!
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