The Basics: How to Leverage a Simple Service Level Agreement
Service level management offers tremendous opportunity for building a great relationship between a provider and their customers, by establishing a mechanism for communication and effective service delivery throughout the life of an agreement. Establishing service level agreements enables the partners (provider and customer/consumer) to create a formal understanding of the service being provided, along with the terms and conditions for providing that service. They should be thought of both as a more than a contract, as they offer an opportunity for the provider to understand their customers’ needs and to take them into consideration during service operation, thus ensuring a good relationship. This blog defines service level agreements and provides a simple, 3-step approach to great service level management.
Service Level Agreements Defined
Simply stated, a Service Level Agreement (SLA) is a formal agreement between a provider and their customer, defining how service will be delivered. There are several key ingredients to a good service level agreement:
- Description of the service provided, in detail
- Hours of operation of the service
- Support hours
- Expected availability of the service
- Indicators of good performance and how performance degradation is to be treated
- Description of the handling of major outages and individual service requests and support
- Consequences of missing the agreed upon service level
- Customer responsibilities
With service level requirements understood, a provider can also ensure that foundational services provided by other providers are considered:
- Supporting services provided by other internal providers: Agreement is needed between internal providers that support the customer-facing SLA, and which must be sufficient to enable issues to be resolved within the established SLA. These are called operational level agreements (OLAs).
- In many organizations, OLAs have been established instead of formal agreements with the customer, resulting in support that can be measured and assessed but which may not meet customer expectations. This can cause significant delays as support tickets bounce between IT groups, as each group expects the clock to re-start when they receive the assignment. This is in contrast to a true SLA which runs from the time the ticket is opened until it is closed.
- Third party providers: Where IT relies on external vendor services to deliver internal services, any service levels in place with the vendor must also meet IT’s service level agreement with their customer.
Both of these agreement types are also referred to as “underpinning agreements” because they form a foundation on which IT’s SLAs can be delivered. If the outsourced provider does not offer a sufficient agreement for IT to meet its SLA with their customer, IT needs to renegotiate terms with their customer, find alternative means for sourcing the underpinning service or find a vendor who provides the level of service they need.
Three Steps to Service Level Management Success:
Understand customer expectations:
The most important term in the phrase service level agreements is the word “agreement”. An SLA is a negotiated agreement that combines the customers’ needs and expectations with the cost of meeting those expectations. They may expect 100% availability and 24×7 service and support, but in order to achieve this the service needs to be architected with a high-availability design and staff needs to be funded. If the customer is not willing to fund this level of service and support, negotiations begin. Essentially, the agreement is an exchange of customer requirements and budget, landing on an acceptable arrangement at an acceptable cost.
Formalize the Written Agreement
Once the negotiations are concluded, the terms agreed upon are written into a formal document, including the key ingredients mentioned earlier. This may go through several iterations as the parties revise sections of the agreement. Key to this process is ensuring that there are clear definitions and measurements included for aspects like availability and support services. If these are vague too much room is left to interpretation, which could lead to issues in the relationship later on.
Manage the Agreement
While it sounds like all of the work is now done, the opposite is true. For a service level agreement to work well in preserving a provider-customer relationship, constant communication and reviews are a critical part of the process. The worst thing for a support relationship is to sign an agreement then file it away until there’s a problem. This puts the provider in a poor position, especially when it’s time to renew the agreement. To help manage ongoing reviews, several activities become important:
- Reporting: all of the measures to which the parties have agreed should be routinely measured. This is why it’s so critical to understand the measures that will be used to support the agreement during its creation. It should be noted that many service management tools have the ability to see how well SLAs are being met throughout the month, providing early warning signs and enabling providers to adjust quickly.
- Discussion of achievements: The provider and customer representative should meet regularly (at least quarterly) to review the reports and achievements of both the provider and those achievements the customer has enjoyed as a result of using the service
- Business/usage changes: It is also worth discussing any changes the customer is expecting in their business, looking at whether usage will change and adjusting the technology appropriately. This protects both the customer and provider from unanticipated growth that could cause performance issues or from bearing the cost of systems designed for higher capacity needs.
- Other opportunities: When the relationship is going well, there is also an opportunity to discuss other services the provider might offer, to see if there are any needs the customer may have. Especially in a third party service provider, this enables reviews to also generate expanded business opportunities.
When things go poorly:
The last area to cover in this introduction to service level agreements is what happens when things go poorly, when the service isn’t meeting availability and performance service levels or when support is not meeting customer expectations. A provider’s response to complaints is often as important as their ability to provide service at expected service levels. By having these complaints be addressed during regular reviews, it is possible to get the “failure to perform” out in the open before dissatisfaction becomes worse. When this does happen, the service improvement program is a great tool to use to address the situation.
A service improvement program is a documented approach to resolution that includes several activities:
- Document the areas that are not meeting agreed upon service levels
- Analyze the reason they are not able to meet expected service levels
- Review what it would take to turn things around (investments, changes etc.)
- List out the improvements that would bring performance back into compliance
- Agree on the steps/budget required
- Finalize the steps to improve performance as a formal improvement plan
- Integrate a discussion on the progress and achievements into the regular review meetings
- It might be wise to go to a monthly review if reviews are done quarterly
For providers, the value in good service level management is an improved relationship with their consumers, resulting in increased confidence in performance. Over time, this leads to additional opportunities to grow, either in reputation and relationship (internal providers) or to expand the business that’s being done together (external providers). For consumers, a strong support relationship leads to confidence in taking action, enabling the consumer to grow to meet their customers’ needs and ultimately providing the potential for increased revenue.
Cover image by Srinivas
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