Many of the software subscription (Software as a Service) agreements that we review are deficient or silent with respect to a service level agreement or SLA.

SLAs typically govern what support the licensee is to receive, as well as how quickly it is provided.  Additionally, the SLA should include an uptime metric.  Depending on the mission criticality of the software, this uptime metric and the response time for support can be important negotiation points for any contract.  Even in a “non-negotiable” situation, it is important to have the proper expectations, and the SLA may be a differentiator when comparing competing products.  The licensee should be looking for at least some differentiation in response times based on the criticality of the error condition, with complete failure or unavailability of the software being at the highest level with response and remediation targets that are commensurate with the criticality of the software.  For example, if billing and payment software is down on the day your business closes its month end, a reasonable response time would be an hour or less.

Uptime metrics can also be tricky and confusing.  These metrics are typically identified as a percentage.  The first thing to be aware of is what is the basis of the percentage.  This is where many agreements are vague and will require clarification or explanation.  The most clear and unambiguous metric would be minutes per month with the number of 24 hour days specified.  Failure to meet this uptime metric should include an appropriate remedy such as a discount on future services or a refund.  Continued failure to meet the metric should permit termination of the agreement.  Assessing the need for a certain percentage is also a function of mission criticality.  The difference between 99.5 and 99.9 may not seem significant but consider the following:

  • 24×30 = 720 hours per month
  • 99.5% = 3.6 hours of permitted unscheduled downtime per month
  • 99.9% = 43 minutes
  • 99.99% = 4.3 minutes
  • 99.999% = <1 minute
  • The difference between 99.5 and 99.9 is about 3 hours of downtime per month.

This is only one of many important considerations in a software license or subscription agreement.  The members of the Metz Lewis Intellectual Property Law Group (Barry Friedman and Jessica Mozingo) are available to assist and answer any questions.

This post was written by Barry Friedman

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