Service Level Agreements

When you purchase services, the scope of those services needs to be either identified in a specification that describes all the services and measurements and service metrics that are required or they can be specified in a separate document called a Service Level Agreement or SLA that is made part of the overall agreement. For internal functions where groups “purchase” service from another function, the groups may also enter into a form of service level agreement that establishes what must be provided and the scope of that so its clear to both parties what is required.

While SLA’s are most frequently used in purchasing IT services, the concept can be applied to any service that you purchase. What you purchase impacts the tasks to be performed, scope of those services and the metrics that would be used to measure performance. SLA’s frequently include service level credits for failing to meet the agreed metrics. They may also include service level performance incentives when performance exceeds the agreed metric and the customer benefits from that higher-level performance. Failing to consistently meet SLA performance requirements may also be defined as a material breach of the agreement that would give rise to termination rights and claims for damages. Another reason for having SLA’s is when a service isn’t being performed, or is not being performed in a satisfactory manner there is usually a productivity and/or cost impact to the customer. There may also be an impact to their customer’s satisfaction.
For example, if you purchased a service that included help desk services you could be measuring things like waiting times, response times, percentage of issues closed versus requiring higher level escalation as all of those are indicators of the quality of the service. If you were purchasing the use of an on-line service or tool, you would measure things like up-time, number of simultaneous users supported, and agreed performance benchmarks such as response times. For things such as on-site support a SLA could describe hours of service, required response times, measurements of closed calls versus calls needing addition service, parts, and calls requiring escalation.

The key in creating service level agreements is to first list all the tasks that need to be performed considering the 4W;s and an H. Who is responsible? What is their responsibility? Where must they provide the task? When must they provide the task? How are they to provide the task? For each task that must be performed you then determine whether performance may be objectively measured and how it would be measured. If it can and would be objectively measured you establish what the metric would be that would be acceptable performance. You may also establish goals that the service provider will try to meet.

The service level agreement would then consist of:
1.List all tasks the supplier is responsible to perform
2.It would define their responsibility.
3.It would indicate where the service must be provided.
4.It would identify when and include objective metrics for measuring when.
5.It would specify how the service is to be performed and include objective measurements of that performance.
6.For each objective measurement it would include a remedy the buyer has for failed performance.
7.For any buyer task it would list those and limit the buyer’s liability for failing to perform them on time.

Should subjective measurements be used in a SLA? My feeling is there will always be significant concerns about a buyer providing their own subjective measurement in a SLA. The concern is whether they may be trusted to be totally subjective when it comes to money. I do feel that subjective assessments by third parties, such as customer satisfaction surveys for services accessed by buyer’s customers, should be considered as part of measuring performance.