In my previous post, I stressed that SaaS-based software companies are effectively selling a #service, not a product.
Throughout my career in SaaS, I have heard many SaaS companies strive to offer SLA with four (4) 9s or five (5) 9s. Below are overly simplified areas to showcase how the "extra" 9 changes things drastically.
1. Is your SaaS service warrant a 99.99% or 99.999% SLA?
SLA Uptime || Downtime/Month || Downtime/Day
99.9% || 43.2 minutes || 1.44 minutes
99.99% || 4.32 minutes || 8.64 seconds
99.999% || 25.9 seconds || 0.87 seconds
2. Is the infrastructure ready for the extra 9s? Note the SLA from cloud providers. What does this mean to your SLA then? (My favorite question)
Cloud Provider || Instance-Level SLA || Region-Level SLA
AWS || 99.5% || 99.99%
Azure || 95% || 99.99%
Google || 99.5% || 99.99%
3. What is the impact to gross margin, COGS, and Subscription Fee (finance and sales favorite topic)
Assumption (for illustration purpose):
- Server is the only COGS
- only extra server is needed to achieve higher SLA
SLA || Servers || COGS || Subscription Fees || Gross Margin
99.9% || 2 || $240 || $1,200 || 80%
99.99% || 3 || $360 || $1,200 || 70%
99.999% || 4 || $480 || $1,200 || 60%
#SLAUptime #Downtime #SaaS #Service #COGS #GrossMargin #Subscription