Last week’s Verizon outage affecting thousands of customers reminded us of something important: An SLA is basically a promise that you know is going to be broken. And you need to make your own preparations.
Here’s the reality nobody talks about:
SLAs are promises designed to be broken. They’re not preventive measures—they’re compensation frameworks for when (not if) things fail. Your vendor knows it. You should too.
You’re only recouping a tiny fraction of actual losses. Here’s the math that should scare you: whether you’re a small business or an enterprise, SLA compensation typically covers only 2-3% of your actual losses from an outage.
Let’s say a 4-hour outage costs your business $50,000 in lost revenue, emergency response costs, customer support overtime, and reputational damage. Your SLA might get you a $1,000 credit. That’s 2% of your actual loss.
Scale that up to enterprise level—a major outage costing $500,000 in real losses might net you $10,000 in SLA credits. The math doesn’t get better because you’re bigger; the percentage gap stays roughly the same.
The compensation gap gets worse with scale. The more critical your operation, the wider the gap between SLA compensation and actual impact. A few hours of downtime for a financial services firm, healthcare provider, or e-commerce platform can mean millions in losses. SLA credits? Still capped at whatever percentage of your monthly bill the contract specifies.
SLA penalties are for auditors and finance, not operations. Those compensation clauses make your auditors and financial people happy. They check a box that says “we have contractual protection.” But when your systems are down and customers are angry, that future credit does nothing of substance for you or your team trying to keep the lights on.
You still own the risk. Whether it’s customer-facing services or internal operations, downtime is your problem first, last, and always. Your customers and users don’t care about your vendor’s SLA—they care about your reliability.
Build redundancy anyway. If it’s critical, have a backup. Cloud provider SLAs, ISP guarantees, SaaS uptime promises—plan as if they’ll all fail at the worst possible moment. Because eventually, they will.
The lesson: Don’t let vendor promises become your single point of failure. And definitely don’t let SLA compensation become your disaster recovery plan.
That credit you might get next month won’t pay for the customers you lost today.
Key Takeaways
- SLAs are promises designed to be broken - They’re compensation frameworks for when things fail, not preventive measures
- You only recoup 2-3% of actual losses - A $50,000 outage might get you a $1,000 credit; a $500,000 loss might net $10,000 in SLA credits
- SLA penalties are for auditors and finance, not operations - They check compliance boxes but do nothing of substance when your systems are down and customers are angry
- You still own the risk - Your customers don’t care about your vendor’s SLA—they care about your reliability
- Build redundancy anyway - Don’t let vendor promises become your single point of failure; plan as if critical services will fail at the worst possible moment