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Hosting Services & Service Credits

A typical ICT supplier that provides hosting services has a range of service offerings which are usually classified according to increasingly high levels of service, such as bronze, silver, gold. These different levels of service are set out in service descriptions which are often part of the sales material that is provided to customers. Importantly, these service descriptions often include “uptime guarantees” or “availability guarantees”. Therefore it is essential that the service descriptions, particularly any uptime guarantees or availability guarantees be carefully reviewed to ensure that the obligations can be met. In particular, it is important to detail:

1. Which equipment is included in the equipment which is subject to the uptime or availability guarantee?

2. How will the uptime or availability guarantee be measured? This includes the technology or software tools which are used to measure uptime or availability. It is essential to be able to prove to the customer that the uptime or availability is actively measured and monitored. Accordingly, these clauses need to be drafted according to the actual technology that is going to be used to measure the uptime or availability. Unless the ICT supplier is able to measure the uptime or availability it will not be able to provide an uptime guarantee.

3. The time intervals over which the uptime or availability is to be measured. Generally, the longer the time interval over which uptime or availability is to be measured the more favourable it will be to the ICT supplier, because any downtime will be able to be averaged over a longer period.

4. The consequences of failing to meet the uptime or availability warranty should be clearly set out. Often these remedies include service credits.

SERVICE CREDITS

Service credits are often provided by an ICT supplier as a remedy to a customer for the ICT supplier’s failure to meet the uptime or availability guarantee. Typically the service credits are a relatively low percentage of the monthly fee that is payable to the customer for the month in which the uptime or availability guarantee is not met. It is important, from both the customer’s and ICT supplier’s point of view, to agree whether the service credits are a sole and exclusive remedy for failure to meet the uptime or availability guarantee.

The aim of including such a clause in the agreement is to limit the ICT supplier’s exposure to the customer for failing to meet the service level. However, this is a particularly contentious point as the customer usually requires the right to be able to terminate the agreement if there is a substantial failure to meet the service levels, or a repeated failure to meet the service levels by a relatively small amount.

It is important to deal with these issues as part of the agreement to ensure that the ICT supplier’s margin is adequately protected and the customer understands its remedies for any failure of the ICT supplier to meet the uptime or availability guarantee.

Next, Key Commercial Issues for Hosting Service Agreements. This is Premium Content available only to logged in AIIA Members.

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Master Hosting Services Agreement

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