Service Level Agreement (SLA) Boot CampLearn Management Articles on management-info.biz. Service Level Agreement (SLA) Boot Camp article will help answer your questions on Management Articles.We at management-info.biz specialize in Management Articles. Management Articles at management-info.biz provides the most up to date news and articles. If you have questions please do not hesitate to contact us.
Service Level Agreements, or "SLA's" are tricky but useful mechanisms for managing the risk of an on-going relationship with IT service providers. Unfortunately, most SLA's that show up in service contracts as worthless, cosmetic paper additions. SLA's can be extremely powerful tools to help you and your service provider get the most out of a relationship. What is an SLA? A service level agreement (SLA), in its most basic form, is a contractual commitment to meet specific goals. If, for example, you sign up for a hosting contract with a provider, you may desire an SLA that measures the up-time of your website. If you outsource your help desk, you may want an SLA that measures the time it takes to answer the phone. Usually, an SLA includes a penalty and/or reward framework. For example, many web hosting companies offer a refund based on the number of hours your website is unavailable. On the flip-side, an SLA may include an extra bonus to your help desk provider if all calls are answered within 30 seconds. The following are typical examples of SLA's: "All help desk call will be answered within 90 seconds" "95% of all bills will be printed and delivered on time" "The website will be available 99.99%" "Project X will be delivered within 2 weeks of the planned schedule" What isn't an SLA? An SLA is not a way to cut your costs. Rather, SLA's are mechanisms for managing risks, sharing pain, and benefiting from success. Many SLA's are setup as "outs" to contracts that allow customers to penalize technology providers for non-performance. Although penalties do reduce costs and they do send a strong signal to service providers to improve their service, neither you nor the service provider "win" if an SLA is missed. Think of an SLA as a shared goal. SLA Philosophy The best SLAs are setup to allow both you and your service provider to share in the success and failure of an agreement. If you intend to turn over the operation of your billing system to a service provider, getting the bills out on time is critical. Whether you do it yourself or partner with someone, if you fail to produce invoices, you delay incoming revenue. In this example, your SLA should inspire your vendor to deliver on performance levels that have an actual impact to your business. Let's say your current billing accuracy is 90%. If you increase this accuracy to 95%, you have directly improved your company's bottom line. If you intend to outsource this function, your SLA should include a shared billing accuracy reward to the service provider if they help you improve revenues. Make It Count Some web hosting plans offer an up-time measure that, if not met, will result in a refund to you. Unfortunately, this "refund" may be calculated as a credit based on the time that your site was down and your monthly hosting fee. For example, if you pay $100 per month for hosting services, and your site is down for 1 hour, your credit may only be 14 cents! $100/720 (number of hours in a month) = $0.14. If, on average, you sell $50 worth of goods through your website each hour, 14 cents isn't much of a blow to your hosting company. I recognize that my example is slightly exaggerated. Many hosting companies offer a more material penalty and most web sites do not generate $50 in sales per hour. But you can see how this penalty and SLA is mis-aligned with the business model. If you know you make $50 per hour in sales through your website, your hosting company should incur a much greater penalty for not keeping your website up and running! Whether you negotiate an SLA with a hosting company or a large IT company, create an SLA that is specific to your business and truly establishes risk sharing (i.e. we "win" or "loose" together). Devil In The Details A good SLA has four critical components: description, target, measurement, and penalty/reward. If you have an SLA that is missing one of these components, you run the risk of losing the benefit of having the SLA to begin with. In the web hosting example above, the SLA sounds good, but the actual measurement and penalty weigh heavily in the favor of the hosting company (they have little to loose!) Make sure your SLA's are well defined and agreed upon before you ink the deal. Here's an example of a good SLA: Description: Billing - All bills will be rendered, printed, and mailed on a timely basis to ensure unbilled revenue is minimized.
In this SLA example, your service provider stands to loose or gain substantially based on their performance. Similarly, your company stands to loose or gain substantially based on the performance of the service provider. Depending upon your daily billings, 1% could be significant. Note the specificity of the SLA measurement and calculation in my example. If you are not very specific with the calculation methods, actual performance against service levels are open for debate. Negotiate Up Front Many businesses strike deals with IT companies and leave SLA's as an open item. Many IT service providers will want to establish a "base line" period where SLA's are measured and then negotiated. In many cases, this request is reasonable, especially if an IT company has little to no understanding of your environment and your current performance record. However, if you wait to negotiate service levels until after you ink a deal, you loose tremendous leverage with your provider unless you really think you can walk away from the deal. Ideally, choose a provider that is willing to negotiate a service level up front. In my experience, these SLA negotiations are much more difficult on the back-end. Raise the Bar A service level agreement should be changed periodically. Let's look back at my billing SLA example. Let's assume that after 1 year of service, your provider is billing at an accuracy, on average, of 95%, and in turn, you are rewarding them consistently for beating the original service level. It's time to raise the bar! If your provider can increase your accuracy from 90% to 95%, maybe they can increase your accuracy from 95% to 99%. Raise the SLA bar (target) to 95%, and only reward them if they beat this new level of quality. By providing the right incentives to improve upon service levels, both you and your service provider can benefit. The Shorter, The Better I have seen service contracts with dozens and dozens of SLA's. If you establish multiple SLA's, you and your service provider will have broad visibility into performance levels. However, establishing many SLA's can water down the over-arching performance of a service provider. Put simply, a service provider can "make-up" poor performance on one SLA by beating the performance target of another SLA. To keep things simple, pick the few critical success factors of your business and establish applicable service levels that your provider can truly focus on. Service Level Agreements should be established as a "dashboard" for you and your service provider to share in the success and failure of your arrangement. SLA's are less effective if they are established as contract "outs" or as penalty frameworks, because they fail to drive a partnering relationship. Negotiate SLA's which, if met or beaten, truly benefit your company and your service provider. Always define SLA's to the lowest level of detail possible before you finalize the arrangement since negotiations become even more difficult after the deal is executed. And never commit to an SLA that could hurt you but not your provider. Email 2,900,000+ Recipients Daily! - 100% Spam Free Targeted Bulk Email Service! Instantly Increase Your Sales by 1900% Guaranteed! Starting A Child Daycare. - Complete business package to help you easily and quickly start your own profitable home-based day care business! Article Index: | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | 26 | 27 | 28 | 29 | 30 | 31 | 32 | 33 | 34 | 35 | 36 | 37 | 38 | 39 | 40 | 41 | 42 | 43 | 44 | 45 | 46 | 47 | 48 | 49 | 50 | 51 | 52 | 53 | 54 | 55 | 56 | 57 | 58 | 59 | 60 | 61 | 62 | 63 | 64 | 65 | 66 | 67 | 68 | 69 | 70 | 71 | 72 | 73 | 74 | 75 | 76 | 77 | 78 | 79 | 80 | 81 |
More Articles:1. When Are You Coming Home? Five Practical Tips to Realizing Work / Life Balance By Lonnie Pacelli So let's talk about over-used terms for a minute.If you've been in the business world since the mid 1990s you've likely heard your management espouse the desire for employees to achieve greater work/life balance. Many U.S. companies have adopted programs to help employees strike a better life balance by providing health club benefits, entertainment discount programs, and additional time off for events such as the birth of a child. Despite all this, Americans are of the most overworked and fl… 2. Sarbanes-Oxley and Section 404: Old Dog, New Teeth By Gerald Czarnecki The failures we have seen in the quality and integrity of financial reporting in corporate America are clear evidence that something was awry. It is the responsibility of corporate boards, managements, public accounting firms and regulatory agencies to put confidence back into the financial statements issued by our society’s most significant entities. Although some would argue that Sarbanes Oxley went too far, it is also now evident that government action and the use of enforcement muscle was … 3. Diversity Training: The Worst Possible Reasons to Request Executive Funding By Tim Dawes You’re on your organization's diversity committee. You have the best of intentions.And that's the problem.It leads you to appeal for funding for all the wrong reasons.Take healthcare for example.The US foreign-born population comprises a larger segment than at any time in the past five decades. And this trend is expected to continue(1). People of diverse racial, ethnic, and cultural heritage suffer disproportionately from cardiovascular disease, diabetes, HIV/AIDS and every form of cancer. In … 4. Recruitment - What You're Really, Really Looking For By Alan Fairweather Imagine that you're a sports coach and you need a new player on the team. Would you walk up to someone in the street and say - "I want you to come and play for my team. I'll train you to become the best player in the country." Sounds a bit ridiculous doesn't it?What you'd probably do is watch players in other teams. On the other hand, you might decide to find some young player that you could develop for your team. So you'd spend some time looking for players in schools and colleges.What is it … |
||||
