Service Level Agreement

• Service Level Agreements used to be a part of Service agreements to specify the technical specifications of the services covered by the Service agreement between the parties
• In the last 15 years due to the steep rise and growth of the service Industry and the increased outsourcing of services the importance of the SLAs has increased
• Companies are opting to outsourcing of even their critical business activities to other service providing Companies to cut down the costs of the services and products
• Service providing companies have started helping the Companies to show increase in productivity and increase in the volume of business by providing effective and better services to the end user
• The long experience in a particular type of service business and the new IT tools and support services have helped the outsourcing service providers to achieve a very high level of expertise in their area of activity
• The outsourcing Companies are investing a lot of money in the infrastructure and maintain updated and modern facilities
• The performance of the service providers will have either positive or negative impact on the business houses that outsource to them
• It is necessary for the companies to measure and monitor the performance of the service providers regularly
• If the desired levels of service is not finalized and agreed by the parties earlier, the agreement will not end up in a fruitful and mutually beneficial business relationship
• The importance of the service level agreements has increased due to the increasing complexity of technical service atmosphere
• Service level management


  A science of using minimum resources effectively to achieve the desired services level
• The fundamental concept which governs the science of service level management is 'If you can measure, you can manage' and 'if you can manage, you can improve'
• The objective of SLM is continuous improvement in the quality of services
• Continuous measurement, management and improvement have become a necessity today due to the consistently increasing speed in the change of technology and the available very effective delivery models
• Service level agreement


  A legally binding contract between the owner and the service provider, to deliver a service with a particularly service quality in an agreed price
• Types of Service Level Agreements


  • B2C
  • B2B
• B2C Service Level Agreements


  Announcements made by various Telecom, IT, ISPs and non-technology service providers about the service levels guaranteed to the public, including their customers
• B2C Service Level Agreements


  • Pizza delivery in 45 minutes, free if later than 30 minutes
  • Telephone service: connection in 24 hrs, complaint resolution in 12 hrs, shifting in 12 hrs, 1 month rent free if failed
• B2C Service Level Agreements are unilateral, but the service providers strictly follow the penalty clause
• B2B Service Level Agreements


  Agreements between two businesses, the service provider and the commercial customer, where the service is obtained to use in the course of the customer's business
• B2B Service Level Agreements are legally and technologically complex documents that define the relationship between the parties in clear terms
• Building an effective B2B Service Level Agreement


  1. Finalisation of the requirements by the customer

  2. Preparation of the proposals by the service provider

  3. Appointment of a negotiation team

  4. Negotiations

  5. Finalize the desired service level

  6. Finalize the tolerance limits of services

  7. Meaningful metrics

  8. Finalisation of obligations

  9. Finalise reporting and monitoring systems

  10. Finalise rewards and penalties

  11. Dispute resolution clause

  12. Annexures

  13. Authorised signatories and communication officers

  14. Termination clause
• The customer should prepare a 'wish list' describing the expected user experience, output or final result to be achieved, as the services and technology are changing rapidly
• The service provider should find out the customer's limitations like budget, implementation period, infrastructure, scope of expansion, human resources etc. to prepare effective proposals
• The service provider's proposals should cover solutions, cost effectiveness, manpower requirements, implementation period, review meetings, meaningful metrics, reporting system, training, and after-service model
• A negotiation team with expertise in technology, service aspects, delivery model, updating, review and legal aspects should be appointed, as these are now very important in service contracts along with financials
• After service model and cost


  Normally once the customer is satisfied with the technical aspects of the proposal, they would be keen in having an effect Management system in-built, in the contract. If the service providers are able to convince the customers by incorporating the desired technical and management aspects of the contract, then the negotiation of final SLA will become easier.
• Appointment of a negotiation team


  • The negotiation of a commercial contract in the last generation used to be mostly on the financials arising out of the contract. But now, that too in service contracts the technology, service aspects, delivery model, up-dating, review and legal aspects are very important before the cost part of it. In such a situation where there are complex technological and legal aspects to the contract, the owner of the Company or a high level official of a company alone cannot effectively negotiate and finalize a service level agreement. It is advisable to form a team of people including Authorized signatory, Project leader, Legal adviser for an effective negotiation team.
• Inclusion of the Proposed Project leader in the negotiation team


  The project Leader is aware of the first-hand information about the project including the underlying technology, aspirations of the client, expected end user experience, scope and future development etc.
• Inclusion of a legal professional or the law officer in the negotiation team


  Every sentence incorporated in the SLA should be legally binding and enforceable
• Effective negotiation team


  • When the negotiation teams are strong, empowered and knowledgeable to take its decisions without the necessity to go back to the top management every-time for all the small changes arose during the discussions, the negotiations will result in an effective SLA without much wastage of time.
• Negotiations


  Negotiations by the parties are normally confined to the points covered in the proposal given by the service provider. One of the negotiation team members should have been involved in the making of the proposal from the service provider. The negotiating team from the service provider side should be aware of the basis and components on the basis of which the final cost of the project was arrived at. The Negotiation team from the customer side also should be aware of the areas where they can modify their requirements and the areas where they cannot make any alterations to their requirements. The team from the customer side should also be aware of the scope of work and the future plans of their company.
• Minuting the negotiation meeting


  If both the parties agree, it is good to minute the meeting so that the points on which decisions were arrived at the earlier meetings need not be looked into again, even if the team members change due to unavoidable reasons.
• Having options during negotiations


  Both the parties should have options with regard to subject negotiated by them, because working on only one option without any alternatives might end up in a deadlock.
• Finalising the desired service level


  Finalizing the service level by the parties should happen on the basis of the real requirements of the customer taking into consideration the cost factor also. It is not always the available best service which should be chosen by the customer, in most of the cases, level has to be brought down to make the resources put into optimum use and to make the cost attractive to the customer.
• Considering key performance indicators when deciding service levels


  Certain activities are directly connected to the revenue, brand value and customer satisfaction and certain other activities are administrative activities which does not affect the revenue of the company. Hence the service levels should be chosen on the basis of the importance of the role of the service and key performance indicators of the performance of the company.
• Finalising the tolerance limits of services


  Even though the expected service levels of services are finalized by the parties, it is important to finalize the tolerance limits of each part of service level agreement. Tolerance limits exhibits the minimum and maximum level of the expected service level in every level in every component of the services.
• Tolerance limits for call centre waiting time


  • If there is no waiting time for a caller when he calls a call centre the customer may be very happy but that means the service provider has put excessive tables and callers to serve, which is not necessary. If there is a waiting time of more than 4 minutes a caller, when he calls a call centre then he may not choose to continue the call and the Company may lose that business. Hence the tolerance limit in this case is the mean maximum waiting time of 60 seconds.
• Meaningful metrics


  Metrics is nothing but a scale of measurement. Metrics can be time duration, weight, distance, speed, percentage or any other according to the item which requires to be measured. The data collected can be stated to be meaningful only when they disclose the relevant information to derive the Critical Performance indicators of the performance of the business and the service levels.

  
• Types of metrics


  • Technical Metrics And Business Process Or Operational Metrics
  • High Level and Low Level Technical Metrics
  • Business Process Metrics Or Operational Service Management Metrics