Is a negotiated SLA needed? If so, what penalties are appropriate?
Think about why SLAs are necessary. It’s because you’re protecting something that someone else manages, and you want your service provider to have skin in the game. You know that the provider faces higher costs to offer availability guarantees, costs that could show up in the vendor’s bottom line. They’ve got to account for that somehow, so as you turn the dial up on SLA penalties, the cloud service is going to get more expensive. The point is that there’s a natural tension between low-cost cloud computing and high SLA penalties. The risk premium that any provider must add to its business model–and thus to your pricing–is in direct proportion to financial penalties that the provider would be forced to pay out in the event of an SLA violation. There’s a similar natural tension from the provider’s perspective between high-availability and low-cost operations. SLAs are all about recourse and what you can do to protect yourself when bad things happen with your cloud service provider, but
