MR. ROGERS’ GUIDE TO AN E-COMMERCE SLA

by Brian K. Walker

Over the years I have had the opportunity to be on both sides of the negotiations over service level agreements (SLAs) between eCommerce businesses and the hosting and service providers they contract with.  The two sides are obviously after different things, and have different goals. But as an eCommerce business what should you be looking for in an eCommerce SLA?

(Note: Want to jump to the punch line? Skip to the bottom of the post. Otherwise please enjoy our trip to the Land of Make Believe.)

First, A Trip To The Neighborhood

As a child a big part of my afternoons was Mr. Rogers, and I would get particularly excited when it was time to visit the Land of Make Believe. So, come with me won’t you? (Queue the trolley music and…)

Imagine many, many thousands of funny-looking hand puppets clicking away and shopping merrily on your site. Business is way up. You, as King Friday, are the benevolent ruler of this terrific business and Queen Sara Saturday (your CEO) is quite pleased. Things are going swimmingly and you and your merry customers are so pleased. You revise your forecast, call Henrietta Pussycat, your marketing director, and Daniel Striped Tiger, your merchandise planner, and say “Double down, we’re going places!”

Not A Happy Day In The Neighborhood

But just after you fired off an email to a million of your happiest customers and launch your big paid search buy and display advertising program things go terribly awry. First, Queen Sara Saturday calls and says her son Prince Tuesday can’t log-on to the site from his ski vacation in Vail. Then, just as you are checking into that, X the Owl, your customer service manager, hoots that his team is being flooded with customer complaints that the site is really slow and seems down. A quick check of Twitter shows that people all over the place are having big problems with the site. Finally, you jump over to your laptop. Sure enough, nada. Nothing. No site. 404. You immediately call Lady Elaine Fairchilde who is your key acct rep at the vendor you use.

Now What, Mr. Friday?

So, after much scrambling, and many conversations on the phone and IM with Ms. Fairchilde, your eCommerce platform service provider you are reassured everything is going to be resolved very quickly. You decide to wait it out, don’t panic, and reassure your management and team in turn. You even sleep soundly that night. But then when you wake up in the morning you find nothing has improved – the site is intermittently up and down, but when it is up it is slow. Something to do with a corrupt customer database and a problem with the SOAP service that manages the cart. But, Ms. Fairchilde explains, “No one told us about this campaign and this huge traffic spike. We were caught flat-footed.” This goes on for days. Your plan to double down has gone completely flat. Now you are sitting on a bunch of merchandise and have a bunch of angry, disappointed customers. So, you take the next most logical step and call your corporate attorney Peek-a-Boo Clock.  Your question, “How can we hold this company accountable? Can we recover some of the lost sales, or margin, we would have otherwise received had our site not gone kaput?”

Everyone Has Feelings

Here is where we need to get serious. “No more little ditties about how we are feeling” you say to yourself.  Mr. Peek-a-Boo calls to say, “I am afraid we are not in a very good position relative to the agreement and SLAs you reached with Ms. Fairchilde’s company”. They owe you nothing – except maybe a small percentage of the fees you own them for their services – in fact unless the site has been down more than 2% over the last 12 months, basically they owe you nothing.

The End Of Our Little Dream – What Can You Do?

OK – I apologize for the long setup. I could not help myself – I don’t have to go through editing with these posts (bound to change now). Now, let’s get to the punchline:

eCommerce businesses and the hosting and service providers they contract with are obviously after different things, and typically have different goals:

• The eCommerce business has a site and customer experience in desperate need of development or overhaul. The business leader has a goal and is accountable for getting the site up, operations humming, and transaction flowing - all tied to a revenue goal which was used to justify the project in the first place. And the next holiday-season is in the distance like a steam-whistle on a freight train running down-hill without any brakes. No time to waste.  No time to wrestle over the fine print, and the internal counsel is not often faced with questions over SLAs, so it really kind of gets skipped in the legal process.
• The eCommerce solution provider is trying to minimize risk and exposure. No service provider wants to provide an SLA that will risk their long-term recurring revenue.  Meanwhile, they also want to get the deal done. The sales people want to book the business, and the professional services people hear the same whistle coming. Meanwhile the legal counsel is much attuned to questions over SLAs and is motivated not to commit to anything.  They have all the arguments prepared.

All this often leads to SLAs being pretty “boilerplate” and based on the vendor's paper, with little real security for the eCommerce business. Hopefully all goes well, and this never comes up.

But of course the point of a good SLA is to create accountability and outline a remediation should anything go wrong. While you need to consult with your legal counsel on specifics, here is a breakdown on some common things to look for in SLAs from an eCommerce business and operations perspective:

• Ensure you are compensated for poor site performance. Remediation should include a sliding scale of performance problems, including downtime as well.
• Be aggressive on the thresholds you are willing to accept. 98% availability means roughly 14 hours down a month of unplanned down-time. I don’t think any of us would accept that. Go for 99.99% but we willing to back-down to 99.5% – that’s ~3.5 hrs of unplanned down-time per month
•  Remediation should include some percent of lost sales or gross margin. Compensation based on some sliding scale of the fees you are paying is not putting teeth into it. Develop a scale whereby the vendor has to compensate for lost sales or gross margin if things get bad enough.
• Insist on third-party monitoring tools to ensure transparency. Services from Keynote Systems, Gomez, or Tealeaf may be appropriate, and there are many lower cost services out there who can provide automated monitoring. Tip: Look for automated email or SMS alerts to notify your team of problems. Do not rely on vendor-supplied reporting, no matter how much you trust them. Their reporting may not be that good.
• Consider an index of sites to use as a benchmark. This is a way to not accept mediocrity, but also help the vendor mitigate problems outside their control. Using the same monitoring services used on your site, ping key benchmark sites and create an index. Alternatively you can use an index such as that provided by Keynote.
• Do not allow the vendor to maneuver out of responsibility for your sites performance and stability. If you ask for something, even a customization, it is their responsibility to QA and roll-it-out to production in a responsible way. They need to take ownership. If you add a third-party piece of JavaScript, same thing. If you send them a flash file or some HTML, same thing. Watch out for these exceptions in the SLA.
• Close force-majeure loop holes, and insist on failover and redundancy. Stuff happens, and sometimes it is really bad stuff which I prefer not to belabor, but in today’s hosting and cloud computing environment there is no excuse for a vendor serving the mid to enterprise eCommerce solutions marketplace (or high-scale SMB for that matter) not to be prepared for the worst. Insist that failover and redundancy guarantees be in place, and that the processes, procedures, and architectures are documented, expressed and explained.
• Be proactive with your vendor on your campaigns and traffic forecasts. Don’t make the mistake King Friday made: communicate with the vendor on a regular basis. No one wants a problem and the vendor can only be prepared if they are informed.

I hope you enjoyed this little tale and that some of these pointers are helpful, and as always, let us know how we can help.

Please add to the comments here on the blog to share your perspective on SLAs from the customer and vendor perspectives.

Thanks, Brian

On Twitter? Follow me at:  http://twitter.com/bkwalker

Or please feel free RT:  @bkwalker Guide to eCommerce SLAs:  http://budurl.com/j342

Comments

[Fred Wire]

As a business owner, how would I go about proving to a hosting provider that downtime contributed to sales or margin negatively? Hosting providers often cite that customers will return to a site to shop if a site is down, especially if the brand is strong and it offers products that stand on their own.

Also, you end the article with "Vendor can only be prepared if they are informed" yet you stress "Do not allow the vendor to maneuver out of responsibility for your sites performance and stability?" How can I hold a hosting provider accountable for a lack of planning on my behalf? I understand that, at some point, application software and infrastructure have limits and it seems less than fair to hold my hosting provider accountable to performance metrics if they are not involved in my marketing decisions. I just don't see how they could properly manage capacity without being involved.

Thank you for the article.

[Sam Bayer]

Great post! Thanks for the insights. In the spirit of fairness, I as the vendor, would also like to see my clients own up to their own SLAs to me. Since our eCommerce service integrates into their ERP system in real time, we need to understand their maintenance windows. This also holds true for our clients QA landscape. If it goes down unannounced, we're left twiddling our thumbs unproductively. In addition, since our platform also provides an integrated issue tracking system, we would love to see our clients own up to a SLA for responding to their clients logged issues.

Sam Bayer
CEO
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