1. Service Level Agreement Design and Service Provisioning for Outsourced Services Filipe T. Marques, Jacques P. Sauvé and Antão Moura Universidade Federal de Campina Grande LANOMS 2007

2. THE PROBLEM 2

3. Context Service Level Agreement (SLA) Design – How to choose SLA parameters? Service Provisioning – How to design infrastructure to meet Service Level Objectives (SLOs)? – This is an associated problem 3

4. Past solution: BDIM We have a past solution using “Business –Driven IT Management” (BDIM) Summary – Invert! Dont’ go from SLOs to infrastructure design Design optimal infrastructure according to other criteria and then calculate SLOs – Optimal design uses business considerations Tradeoff between cost and loss Minimize infrastructure cost + losses due to performance Performance = availability, response time – Business Impact model links IT and the business 4

5. Problem with past solution Whose business are we talking about in past solution? – Only the client's business Only applicable to in-house Service Providers – ITIL v3 calls these “Type I” Service providers How to consider outsourced services? – There are 2 businesses – Sum of client loss and provider costs doesn’t make sense – SLA includes rewards and penalties, not considered in original model 5

6. OUR OBJECTIVE 6

7. Objectives Extend models and approaches to outsourced services Multidimensional design problem – Choosing SLA parameters (availability, response time) – Server farm design to provision the service Multi-objective optimization – How to link Client’s business and Provider’s business? – Need new business-IT linkage models 7

8. OUR SOLUTION 8

9. Conventional SLA design approach 9 Choose SLOs (availability and response time) and penalties and calculate lowest-cost infrastructure to meet SLOs

10. Standard solution Build a performance model using available techniques Inputs – Services, load, customer behavior – Desired performance objectives (SLOs) – Resource classes (tiers), resources and attributes (processing power, MTBF, MTTR, cost) Output: – In each class: calculate how many load-balanced servers (for load) and standby servers (for availability) – Cost of infrastructure and hence of service Our addition to standard models – Performance model (reliability theory and queuing theory) to calculate response time distribution and availability 10

11. How to bring in business perspective? Better model the financial aspects of both businesses 11

12. Business model Service price: markup over service price Provider revenue = service price - penalties when availability and response time performance not met + bonus as function of client profit – Can use other provider revenue models Provider profit = provider revenue - service cost Profit margin = provider profit / provider revenue Loss: due to unavailable service and poor response time Can calculate client revenue, cost, profit and profit margin – Revenue model: fixed revenue per transaction 12

13. Optimization problem Business-driven SLA design problem: – Maximizing service provider and client profit margins – Multi-objective optimization problem This yields the optimal infrastructure – Can simply calculate resulting SLOs from performance models 13

14. AN EXAMPLE 14

15. The setting E-commerce 3 tiers: web, application, database Customer Behavior Graph models page hits to browse catalog, ask for product details, buy, register, pay, etc. We use typical values for MTBF, MTTR, resource demands, resource prices We want to compare conventional approach with BDIM approach – Conventional approach uses ad hoc values – T max : 1.5 seconds, A min : 99.96% 15

16. Cost comparison 16 Conventional seems better (cheaper): yearly cost: $324,600 vs $345,400

17. But: let's look at provider profit 17 Profit 12% better, on average

18. Is the client doing badly because of better provider profit? 18 Service costs increase but profit increases even more! Client spends $38,550 more with the business-driven approach while raising profits by almost $562,630

19. SLA design SLOs are simply calculated from optimal business-oriented design T max = 0.112s and A min = 99.968 % 19

20. CONCLUSIONS 20

21. Summary We have presented a business-driven method to design SLAs for outsourced IT services Approach is to link provider and client financial results and tie these to the infrastructure Instead of defining SLA parameters in an ad hoc way, we optimize the business results and simply “pick off” the SLA values 21

22. Conclusions We have shown that SLA design from a business perspective can: – Be used to choose SLOs, rather than uding the old “finger in the air” approach – Yield better financial results for both service client and provider businesses An optimal tradeoff can be found that is beneficial to both 22

23. Future Work Major weakness is that business-IT linkage model is only applicable to an e-commerce type scenario – Need to investigate linkage models for other types of business processes Need to investigate other dimensions in the SLA design space such as how to define optimal penalty and reward functions Rethink SLAs to put business-oriented SLOs? 23

24. THANK YOU! 24