What good is a SLA without a penalty?

I know its been quite some time since I last wrote a post, and i am trying to get back into blogging again..

That aside, I was recently involved in a selection panel for a new supplier, whilst not normally exciting and usually filled with a lot of standard terms and conditions, i was quite shocked to see a major vendor had in their SLA section that they would adhere to a 24x7x4, however there was no listing of what the penalty was if they breached.

We raised this with the particular vendor, and what was even worse, is when they said “yeah, thats our normal, if you want penalties included for breaches, then you have to pay a higher cost for the SLA”

Im sorry, but I thought that’s what a SLA is for?

I would love to hear your opinions on the matter, and whether all SLA’s, especially Enterprise level SLA’s should have penalties built into them no matter what, whether it be financial penalties or otherwise.

You can probably guess by now that the vendor is question was ruled out from selection on these grounds, as the cost increase for the SLA was approx. 30% more ontop of the original offering.