In-Depth

Implementation SLAs: Should You Take the Bait?

SLAs help ensure the timeliness and success of your application implementation, but they're anything but a slam dunk

• By Stephen Swoyer
• 08/03/2004

It’s a vexing question, to be sure, but consultancy AlignIT Group points to an oft-neglected avenue of opportunity: the implementation service level agreement (SLA). That’s a promise, backed by the full faith and credit of your software vendor, that your implementation will complete in a timely and successful fashion.

Sounds like a no-brainer, especially when a surprising number of vendors are willing to offer them. Implementation SLAs are anything but a slam dunk, however: they’re usually priced at a premium—typically at one to six percent, but sometimes at more than 10 percent—of an application’s retail cost.

How do you know when to take the bait? “From the evidence we have, the practice of using an SLA for implementations has wide appeal. The key is to better understand under what conditions and which types of projects the investment in an SLA pays the highest dividends. Given the poorer outcomes for late adopters, it’s possible that all SLAs are not created equal,” write Carey Azzara and Steve Garone, both managing partners with AlignIT.

According to Azzara and Garone, roughly fifty percent of “majority adopters”—bandwagon companies that implement software technologies (e.g., CRM) along with everyone else—are offered implementation SLAs. On the other hand, almost 64 percent of early adopters and 60 percent of late adopters are offered implementation SLAs.

How much are companies willing to pay (as a percentage of the total cost of their software) for SLAs that ensure the success and timeliness of their application implementations?

A five to six percent premium seems ideal: around 55 percent of early adopters, nearly forty percent of majority adopters, and approximately 45 percent of late adopters opted for such SLAs. Elsewhere, a surprising number of vendors—28 percent of early adopters, 20 percent of majority adopters, and about 11 percent of late adopters—were comfortable paying a nine or 10 percent premium.

Premium payments are only part of the SLA puzzle, however. “[P]ercent of project payment is likely to be only one of several determining factors for the level of service received from an SLA,” write Azzara and Garone.

In the end, they say, companies should be willing to pony up the extra cash for an implementation SLA when they’re dealing with business-critical applications, or with software technologies—such as CRM—that are notoriously difficult to successfully deploy. “You should expect and be willing to pay a higher premium for an SLA related to application implementations that are core to business success and for applications that are known to be inherently more difficult to deploy,” Azzara and Garone conclude.