On Premises: E-Commerce Growth Makes Service Level Agreements Critical

Posted: 05/2000

E-Commerce Growth Makes Service Level Agreements Critical
By James R. Dukart

In the age of e-commerce and instant communication, telecommunication networks move closer to the crux of business operations for many companies. One result is that performance becomes crucial to–in some cases indistinguishable from–the overall performance of
the business.

Simply put, for many of today’s businesses, if the network goes down, the business goes down.

That fact has not escaped the notice of customers and carriers alike, who increasingly are asking for and/or are providing SLAs to address network performance.

SLAs are formal or informal agreements between carriers and customers to measure and analyze network availability, delay, throughput, customer service and overall network cost. The agreements are particularly hot today because of increased reliance on public networks, such as, the Internet, recent high-profile network outages and carrier competition for enterprise business.

International Data Corp.
(www.idc.com) reports that a recent poll of 500 network executives at large businesses showed nearly 90 percent of them may require an SLA from carriers within the next 12 months. That number is an increase from the 30 percent responding in a similar poll only two years ago.

IDC’s network management research director Elisabeth Rainge says she expects the SLA demand to grow in number and in scope. They will evolve performance measurements and restitution schedules to overall plans for managing network resources, she says.

“Both IT managers and business managers rely on SLAs as formal or informal contracts,” Rainge says. “The SLA functions as the ultimate objective to which virtually all management resources are directed.”

Ultimate Objectives

SLAs become objectives by spelling out network metrics, providing a means to measure them and offering a framework for remuneration if the goals are not met.

They can stretch across an entire end-to-end network or provide guarantees for only a certain class of traffic or service. They also can be geared specifically to a set of switches or other network hardware.

Graph: U.S. and Western Europe External/Service Provider Service Level
Agreement Requirements, 1999

IDC says what the top metric enterprises want to see in an SLA is overall network availability, followed by network availability for dial-in or remote users, Internet service availability, network response time, help desk response time, and finally, circuit provisioning and upgrade response time.

In addition to setting out metrics and measuring network performance, a robust SLA should include immediate performance and fault reporting to an enterprise and to all network partners. These reports should include an interpretation of network statistics and be available real time to all contracted parties.

The SLA should spell out what happens if a specified metric is not met. The best SLAs also include suggestions for how to optimize a network based on traffic patterns and usage. It also can provide capital investment suggestions, bandwidth allocation and least-cost routing.

IDC says larger enterprises appear more interested in SLAs than medium-sized or small businesses, but Rainge says that may be more a function of the complexity and relative novelty of SLAs than it is genuine corporate need.

Rainge faults carriers for dragging their feet on SLAs.

“Right now, SLAs are basically hollow. They function as a talking point on the part of the carrier,” Rainge says. “There is still so much work to be done on the part of the enterprise to prove that an agreement has been broken, so the enterprises are doing all the legwork. The SLA story is still going to belong to the enterprise for the next year and a half.”

Using SLAs as Tools of Strength

In order for that story to move into the carrier space, carriers need to look at SLAs less as a “gotcha” device and more as a tool to strengthen and promote business, observers say.

SLAs can help carriers do this in a number of ways.

Minacom International Inc.’s
(www.minacom.com) COO Steven Murphy says SLAs address three strategic business points central to the heart of any competitive carrier. First, carriers want to increase billable minutes by increasing network efficiency; SLAs provide critical data for planning and attaining optimal network performance. Second, carriers want to reduce churn; SLAs serve as excellent customer retention tools. Third, carriers want to optimize networks across multiple systems to roll out advanced and higher margin services for customers; SLAs provide the base data for that type of work.

Murphy says SLAs can be used as a competitive marketing tool. He cited British competitive carrier Primus Telecommuni-cations Group Inc.’s
(www.primustel.com) 1998 use of an SLA and quality assurance promises to win the $250 million annual international telecom contract of the United Kingdom’s Major Energy Users’ Council.

Primus proposed a system that included proactive monitoring of all circuits, inter-machine trunk testing, call-through testing, calling card testing and hooks to existing provisioning and ticketing systems, Murphy explains.

Among the SLA mandates in that transaction was a requirement that Primus provide benchmarks against other carriers, fault repair targets, a remuneration schedule if targets are not met, complete fault reporting standards, and secure web-based viewing of reports, faults and trouble resolution.

“The SLA is clearly a way for resellers to differentiate themselves,” Murphy says. “Primus wanted to be the wholesale carrier, and they needed to beat the incumbent out. An important factor was that they promised a web-based vehicle to view what was going on in the network.”

Promoting Growth

Objective Systems Integrators Inc.’s
(www.osi.com) global marketing vice president Chris Simon says carriers should understand that service management is a critical customer service function, but that it also plays a key role in business expansion and new business migration.

It also is critical in the ASP model, in which carriers increasingly offer a suite of e-business capabilities to enterprise customers, all predicated upon airtight network availability and quick response times.

“The only reason for SLAs now is to beat your competition,” Simon says. “A lot of people are trying to ‘me-too’ SLAs, saying, ‘if they have that level of service, I have it too.’ In the future, though, I expect to see more information being generated by SLAs and more customized SLAs.”

Such an example is a virtual SLA that OSI did with Telecom New Zealand
(www.telecom.com.co.nz), Simon says. OSI used the SLA to help TNZ monitor mean times to provision and repair lines. Based on that data, OSI was able to suggest the automation of several process management functions.

“They had a fairly high failure rate, and we helped them eliminate or at least reduce that,” Simon says. “Using the SLA, they can monitor and change how they are performing certain functions, knowing what their repair and provision times are and should be.”

Murphy adds that carriers can gain an important leg up on the competition through SLAs.

He explains all competitive carriers attempt to buy and provision bandwidth in a way that they will get the greatest bang for bandwidth buck. Doing so requires the ability to chart the optimal path through the network for any particular transmission.

“What we want to do is take the quality of service and least-cost routing data and create a mechanism to integrate them, so we can look at quality of bandwidth over certain routes,” Murphy says. “We can then translate that back into routing rate tables to get our reroutes.”

Simon cautions that enterprises and carriers have to be careful about over-promising on SLAs.

“In the case of some of the more catastrophic network errors that have occurred recently, an SLA is not going to do anything,” Simon warns. “The SLA process itself is not going to eliminate errors, it will simply help you figure out after the fact what happened.”

At the same time, SLAs should provide some predictive power, helping network managers and carriers identify and obviate certain types of network failures before they hit the enterprise or public customer level.

“A key question will be who sees your network end to end, and how does the SLA spell out how you report it back to customers and network partners in a meaningful way,” Simon says. “But in terms of solving problems as they come up, I cannot afford to send you a note saying you have a problem. I need to reconfigure, reroute and reactivate, before you even know it.”

Beyond Feeds and Speeds

Rainge points to an even more important role for SLAs in the near future. In
the age of e-commerce, she says SLAs should become more prevalent and cover more ground.

“The focus has been on response times, availability and help desk times,” Rainge says. “But it really comes down to helping people meet their business goals. In the SLA management market, you are better off thinking of yourselves as business management consultants than focusing on feeds and speeds.”

Broadening the scope of SLAs will take place as two things happen: electronic commerce spreads to more industries, and carriers finish aggressive network buildouts and concentrate on capturing new customers, Rainge says.

“The enterprise dynamic is clearly being driven by the big financial houses, who have been far more focused on reliability due to electronic commerce.” She adds e-commerce is rapidly spreading to all industries.

One effect on SLAs is they will become less a tool of fault management and more one of performance management, she says.

“In e-commerce, if it’s broken, it’s too late,” Rainge cautions. “Nobody will care about fault management anymore. It will all be about real-time performance. There will be no luxury of time or space for the competitive carriers.”

Carriers may step up to the SLA plate as they complete networks and compete for new business, Rainge says.

“The service providers are focused on building out new services; only in two years or more will they have the breathing space to focus on performance and issues of churn,” she says.

In the meantime, SLAs could be a boon to enterprises and competitive carriers alike.

“No new competitive carrier is going to come out of the gate and say, ‘We are really good at this. This is how we built our network,'” Rainge says. “Carriers could and should do something, but the reality is that the enterprises will have to drag the carriers kicking and screaming into the more regular use of SLAs.”

Murphy and Simon disagree.

Murphy says while it is true there is no “silver bullet SLA,” and it will take time for carriers and enterprises to develop full SLA standards and requirements, he sees the agreements becoming “a standard part of doing business,” which competitive carriers should embrace.

“The carriers who appear to be least interested in giving an SLA are incumbents,” Murphy says.

Simon says it’s simpler than that. “We are a long ways from performance being a nonissue, and if performance is an issue, SLAs are an issue.”

James R. Dukart is a freelance writer based in Minneapolis. He can be reached at
[email protected]