Cost analysis and cost models

SLAs are for one purpose only

SLA's To Manage Performance
A service level agreement (SLA) is a negotiated agreement between two parties where one is the customer and the other is the service provider.
SLAs are commonly used in I.T. services, call centers, facilities management and most professional services.

The agreement should normally include the following :

  • Basic information. The parties to the agreement, a brief description of the agreement, signatories, effective dates, the responsibilities of both parties and a description and scope of the services must all be covered.
  • Service and support to be provided. Specifications of hours and days that the service will be offered both in standard business hours and after hours and within what time frames.
  • Performance measurement. In the SLA service performance must be defined in terms of availability, reliability, throughput, quality, transaction response time or whatever metrics that are most relevant to the outsourced service. An explanation of the metrics and how they are calculated is very useful.
  •  Reporting and reviewing. Define the frequency of planned reviews, whether face to face or in reports, the content and distribution of report and responsibility for action items.
  • Problem management. Include a description of procedures for resolving service-related disagreements. It must be perfectly clear how problem reporting must work including conditions of escalation to next higher level of support. Actions to be taken in the case of continued poor- or non-performance must be stated.
  • Customer duties. The customer's responsibilities must be clearly defined including the training to be provided, customer points of contact, use of resources and how they will provide the platform for the services to be successfully provided.
  • Disasters and emergencies. Even with the best planning and tight SLAs, disasters occur. Who will do what and when in the case of a crisis must be clarified upfront. This is especially important in I.T, security, safety and other critical services.
  • Penalties and credits. When outsourcing services, penalty clauses are a "must" but should be balanced with incentives or credits. Rewarding service providers providing superior performance is as important as penalizing them in terms of poor service.
  • Amendments. Circumstances change, companies grow, they merge with others and so the needs will also change. An explanation of the procedure for both parties to request minor changes to the way the service is provided should be included.

The agreement may be verbal or written, it may be an appendix to a contract or a free standing document. The SLA records a common understanding about the acceptable level of service that the customer expects to receive.

One last thought. Keep it short. The longer the document, the more complex it will be for you and your service provider to manage it.

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