Out-Law News | 27 Jun 2013 | 2:03 pm | 3 min. read
Consumers increasingly expect business systems to be available all day every day, allowing them to bank, shop or engage with businesses at any time, but one expert has warned that the cost of this availability is prohibitive.
Consumers assume that technology and the underlying IT systems will be available to them at their convenience. Speaking at a roundtable discussion event on IT outages hosted by Pinsent Masons, the law firm behind Out-Law.com, Simon Acott, director at cloud and IT service provider Exponential-e, said, though, that the cost of entirely mitigating against IT outages may be too much for some companies to afford.
Acott said that businesses must weigh the cost of putting measures in place to avoid systems going down against the risk associated with IT outages occurring, such as a loss to organisations' reputation and the impact on their brand. Whilst it may be "possible" to prevent any IT systems 'downtime', organisations must assess whether it is financially affordable for them to ensure, he added.
"The reality is that systems will fail," Acott said. Achieving 100% is either not going to happen or will be "staggeringly expensive", he added.
It's about "finding a balance between risk and reward", he added.
Expert in IT contract negotiations David Isaac of Pinsent Masons said that there is an increasing focus on incentivising suppliers to perform beyond agreed service levels. However, he said that there is a "disconnect" between the rhetoric and what actually appears in the service level agreement (SLA) terms within IT contracts, because the overriding factor of price ensures that some of those incentives are not "signed off".
Andrew Marks, the chief information officer at oil exploration production company Tullow Oil, said that there are drawbacks to framing SLAs in a way that see suppliers subject to penalties if they fail to perform as contracted to do so.
He said it can cost companies more to "see through" the levying of contractual SLA penalties than what it can obtain in value from those penalties. He said it was better to "pay a premium" to suppliers to deliver beyond the contractual minimum where the supplier themselves stands to make "pure margin" if it achieves that.
David Bickerton, vice president of Hewlett Packard Enterprise Services' IT outsourcing portfolio in the EMEA region, agreed that SLAs had traditionally been contractually framed to be penal in nature.
Bickerton said that businesses need to ask themselves what they are hoping to achieve through IT outsourcing when they negotiate SLAs. He said suppliers do not want to sign up to SLAs that are not achievable and added that it was much more welcome that there is a move towards an incentives model.
Damien Saunders, director of the cloud networking group within systems availability provider Citrix, said that there is a natural presumption among IT customers that IT services they are buying will always be available. He said IT buyers can plan better by assuming that there will be an inevitable downtime to systems.
The total cost of recent IT outages affecting RBS, Blackberry and O2 is estimated at being around £240 million, but the panel agreed that the figure is a probable underestimate and will not account for costs attributable to intangibles such as the damage to reputation and brand.
With regular technological advancements to consider, David Barker, IT dispute resolution expert at Pinsent Masons, said that IT customers should regularly review their contracts with suppliers to ensure that the contract is still relevant for meeting the needs of their business. He added that it was wrong to see IT as a cost to business rather than an intrinsic part of it.
Isaac said that it is important for IT buyers to ensure that there is strong governance, good planning, and communication up and down the supply chain when outsourcing IT services. He said IT buyers cannot leave responsibility for the governance of those services up to their sourcing providers. Barker added that buyers must work out "boundaries for responsibility" with their suppliers. The measures will help IT customers obtain what they need and want from IT contracts and at the same time help mitigate the risk of IT outages occurring, the panel agreed.