A Good Agreement

The Service Level Agreement (SLA) is on of the most essential criterion at the heart of every ICT project. In fact, it is the determining factor for a sustainable model in the outsourcing of crucial enterprise operations to Data Centers.

 So what constitutes good terms and conditions in the T&Cs of a good SLA?

In 2009, a leading domestic airline reported revenues of almost RM 3.2 billion which translates to a staggering amount of RM 8.7 million of sales in a single day – equivalent to the purchase price of 4 luxurious homes in the heart of the country’s capital city, Kuala Lumpur.

Just imagine if the airline’s online bookings and purchases server – hosted at a Data Center, shuts down for even a day? What could be the monetary losses, now that flight bookings and purchases cannot be done online? The airline would have suffered a RM 8.7 million in revenue, for every single day that their online system is downtime.

The database server, in this context, is the key ˜asset’ and backbone to the airline company – whereby customers’ information and transactions like demographics, sentiments of the purchasing patterns and credit card details, etc, are stored. Data Centers are often outsourced by airlines and hundreds of other companies for the storage of their crucial ˜customer’ and ˜business’ data.

Over the past 20 years, the ICT industry experienced a sharp increase in the outsourcing of non-core IT requirements to data centers.

Reason is that Data Centers provide economies of scale in hosting the multiple servers required by the company. Power redundancy and cooling are the two critical environmental elements for the storage of servers.  By physically locating their servers in a collective ˜server farm’, companies can gain huge benefits via

a) Cost savings

b) Minimized the complexities involved in maintaining the servers

c) Improved operational efficiency and

d) Reduction of risks associated with IT disruptions.

Most data center operators offer SLAs in their contracts with customers who decide to hosts their business servers at their sites.

To a significant level, the terms and conditions of the SLA determines the cost of that particular outsourcing agreement. SLAs that provide guarantees up to four 9’s (99.99% uptime) requires that the provider builds redundancy in their core infrastructure and provide back-up supplier such as UPS and Generator; this will be factored into the cost of service provided by the Data Center provider.

That is why companies need to know the implications of the SLA with their Data Center provider, in order to determine a top notch Data Center to trust their business to.

What To Look Out For?

Generally, the impact of business loss due to any downtime far exceeds the cost of engaging the hosting service of the outsourced Data Center. So, even a 100% refund by the Data Center would be insufficient to compensate the business loss incurred by the customer.

This is why companies cannot take for granted the criticality of matters such as back-up, network connectivity and data security, as these are the very issues that are identified behind business systems downtime which lead to monetary loses and lost of customers’ reliability/trust in the company.

The following lists the basic knowledge on what constitutes to a reliable and secured Data Centre, that can serve as the ideal ˜Terms & Conditions’ in the SLA contract with your Data Center provider.

In a data centre infrastructure, there are a few basic SLA elements:

  • Cooling ambience: The data centre must have a temperature within 22ºC +/- 3ºC. Failure to this requirement, the server will hang and eventually shuts down.
  • Facilities, or Power SLAs: This guarantees the environmental and power services in the data center facility to operate without interruption. Loss of power creates domino effects to the disruptions- loss of cooling, server shuts down in the data center and consequently triggers penalties to the service provider.
  • Network connectivity: The platform of “uptime” guarantee for the network connections. Network latency and packet loss is a more fine-grained SLA that ensures a minimal amount of packet loss and latency on backbone links connecting the data center. This type of SLA is especially important for real-time communications (voice, video) or time-sensitive transactions (alerts, stock trades, etc.).
  • Temperature stability: More recently companies are demanding guarantees of stable (cool) temperatures. This is needed because of the challenges posed by high-density and extremely warm blade servers.

By having an awareness of what constitutes the terms and conditions of a good SLA with your outsourced Data Center provider, CIOs, CTOs and IT Managers are able to exercise care and prudence in ensuring the reliable operations of their company’s business 24x7x365.

~Article published in Smart Investor, October 2011

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