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Service Levels in SaaS Contracts: Pitfalls and Negotiation Tips for 2025

By Timothy C. Colwell, Executive Vice President at AOTMP
Service Level Agreement

Service level agreements (SLAs) are critical instruments for managing expectations and vendor performance in SaaS contracts. However, SLA terms vary widely in enforceability and impact.

Best practices stress that SLA commitments and associated service credits should be drafted as enforceable obligations, not mere aspirations, to ensure effective recourse when issues arise. Service credits are appropriate remedies for routine performance disruptions, but generally insufficient for significant outages or consequential damages such as business losses or legal penalties.

While large SaaS vendors often have standardized SLA templates, negotiation is possible, especially around service credit amounts. The use of legally recognized standards such as “commercially reasonable efforts” instead of vaguer terms like “best efforts” provides a clearer basis for enforcement and reduces ambiguity.

SLA negotiation should be viewed as one element of a larger vendor relationship management strategy. Contracts cannot substitute for active collaboration, issue resolution frameworks, and strong communication channels that underpin service quality.

Legal and IT teams should collaborate closely to carefully draft and negotiate SLA terms that align with business needs and risk tolerance, continuously reviewing and updating agreements as service landscapes evolve.

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This post is sponsored by Sakon and Bearstone.

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About Sakon

Sakon is the Telecom Cloud — a governed architecture that brings clarity, control, and automation to global enterprise telecom and mobility operations. As a pioneer in telecom lifecycle management, Sakon created the industry’s first unified system of record and continues to lead with data-governed solutions that power real-time visibility, intelligent automation, and modernization across network, wireless, and financial systems. Built for outcomes, Sakon helps CIOs, CFOs, and IT leaders stabilize platforms like ServiceNow, Coupa, and SAP, reduce risk, and drive transformation. Beyond technology, Sakon supports global connectivity through its teams and Kids Connect Global, making telecom smarter, simpler, and more equitable. Learn more at www.sakon.com.

About Bearstone

Bearstone is a telecom vendor governance firm founded by Bill Henrichs, Former Head of Telecommunications at Simon Property Group. Managing telecom for a 200+ site portfolio, Bill saw what most CIOs learn: invoices routinely carry unauthorized charges — services billed after disconnect, rates outside contracted terms — that no one is validating line by line. He built Bearstone to close that gap.

Bearstone delivers BearGuard — a managed governance service that validates invoices against contracted terms, surfaces unauthorized charges and variance, and holds carriers accountable for correction. Where TEM platforms stop at reporting, BearGuard begins.

Headquartered in Noblesville, Indiana, Bearstone serves multi-site enterprises — retail, hospitality, and distribution — with 200+ locations or $2M+ in annual telecom spend.

Learn more at www.BearstoneLLC.com/ExecutiveBrief  

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