This post is second in a series of recommendations on how procurement can shape and structure AI platform licensing contracts.
Artificial intelligence (“AI”) use and implementation is exploding across the business landscape. As enterprises quickly move forward to implement and integrate AI technology, procurement’s role is no longer solely focused on software licensing pricing or performance. SaaS-related contract templates do not contemplate the complexities of licensing AI technology and so procurement organizations must evolve their mindset on how to negotiate AI contracts. In this post, we will discuss several key service level agreements that should be included in any AI contract.
Traditional uptime Service Level Agreements (SLAs) for SaaS software are no longer sufficient for AI technology. SLAs for AI must be based on performance standards such as outcomes and quality of the outputs. Given the nature of AI and its outcomes, the following charts provide some recommended SLAs to include in enterprise AI contracts:
Robustness
“Robustness” refers to an AI platform's ability to maintain a baseline level of performance and reliability under challenging conditions. Challenging conditions include unique cases, noise, adversarial attacks and data drift over time. Traditional software Service Level Agreements (SLAs)—which prioritize raw infrastructure uptime—are insufficient for AI platforms.
To ensure that the AI platform is robustly constructed and the language model is strong, AI contracts should consider a combination of data resilience, accuracy stability, and fail-safe execution metrics. The key SLAs for AI model robustness is structured around four (4) key metrics:
Penalties for Missed SLAs
Penalties for missing AI Service Level Agreements (SLAs) differ significantly from traditional SaaS agreements. In AI systems, failures often stem from silent degradation, hallucinations, or data bias rather than simple server downtime.
When an AI vendor or service provider misses an AI-specific SLA, consequences are structured through contractual service credits, remediation escalation paths, commercial exit terms, and regulatory liability clauses. This approach is like SaaS contracts. We will cover recommendations on penalties in future blogs.
Final Thought
AI procurement is as much about risk management as it is about innovation. By embedding strong service level agreements directly into procurement contracts, organizations can adopt AI responsibly and ensure that SLAs are geared around outputs rather than just uptime.
Reach out to us today to discuss how we can support your enterprise in the negotiations of AI contracts. Our global IT category managers and IT procurement strategy consultants are current and former category practitioners who have experience in negotiating these types of contracts.