In an era where businesses are struggling for their survival due to the pandemic. IT leaders should look for ways to get the best out of their technology vendors and service providers. The best way to do that is to agree upon a service level agreement.
A service level agreement sets the right expectations about service quality and allows you to quantify the service quality through metrics. Additionally, it also highlights the compensation provided to your business if the service provider fails to deliver the promised level of service quality.
This will come in handy especially when it comes to understanding the level of service you will get in return for your IT spending. It helps IT leaders justify the IT budget in front of the board members as they clearly know the expected outcome. Not sure how to negotiate, manage, measure, and create a service level agreement? These best practices will help you do all that and much more.
Set Realistic Goals
Assess your business needs and what type of performance or service level you actually need to deliver uninterrupted products and services to your customers. Also, analyze the industry standard and it will give you a clear idea of whether your needs fall inside or outside the boundaries. Your goals should neither be too complex or too easy for vendors to meet.
You should set realistic goals and expectations otherwise, you will also be disappointed with the final outcome. The cost of service is directly related to the quality of service requested by clients. This means that the higher your expectations or goals might be, the more money you will have to pay.
Bring Everyone On The Same Page
One of the biggest challenges companies face is that business operations and IT departments tend to move in different directions. There is no alignment, cohesion, or coordination between the two as a result. An SLA can neither be developed nor implemented. Thanks to digital transformation, this has changed as IT is now playing a major role in the decision-making process. And financial decisions. When done the right way, SLAs can not only creates consensus among different business units. But can also help CIOs implement decisions.
There are instances when you could miss out on clauses and terms that you might have ignored. Joel Martin, Vice President of cloud strategies at HFS research said, “Legal teams can be focused on business and financial risk rather than IT dependencies or the impact of system outages to delivering services.” That is why it is imperative that you review the terms multiple times so you don’t miss out on any important clauses. This usually happens when you sign the contract for purchasing the best-dedicated server, buy VPS or web hosting for your website without reading about the guaranteed uptime and customer support.
IT vendors either trap you into a lock-in or quotes you a high price. In both cases, you should negotiate your service level agreement with your IT partner. You can save a lot of money by negotiating your contracts with your vendors and service providers.
A good service level agreement contains mutually agreed upon finances. As well as non-financial penalties when service level agreements are not met. If there is a clause which both or even one party does not agree with, it should not be included until mutual consent is achieved
Business Unit Level SLAs
Most businesses have different processes, workflows, and systems for different business units. That is why it is important to have a separate service level agreement for every business unit. As one size does not fit all. It will not only improve customer service but also help you reduce cycle time. You will see a marked improvement in the productivity and efficiency of each business unit as well as the number of satisfied customers.
Whenever you are creating a service level agreement, you need to do it with an assumption. That the efficiency, productivity, and performance of your vendor in completing different tasks will only improve with the passage of time. This means that you need to narrow down your service level agreement as time passes. This will also give your IT vendors incentives to improve their service. As a result, they will continue to maintain the highest level of service quality. And you get consistent performance over a long period of time. This makes it a win-win situation for both businesses and IT vendors.
Focus on Outcomes, Not Inputs
Instead of laying too much emphasis on input or process-based metrics, more and more companies are shifting their attention towards outcome-based parameters. According to Amy Fong, Vice President of Everest Group, “The most interesting shift is from SLAs to what we refer to as XLAs, or experience level agreements. These measurements focus on the business outcomes of the service being delivered tie directly to end-user satisfaction.”
If your business is customer-centric then, your targets should reflect that too. Your targets will become more sophisticated and should look beyond service-based metrics such as capacity, availability, and reliability. This is where experience level agreement can come into play. Experience level agreement focuses on the outcome customers want to achieve, the amount of effort they need to put in to achieve their goal, and the benefit they expect.
Make Changes According to Situation
One misconception most people have about service level agreement is that once you have created it, you cannot change it. That is not true. Your service level agreement will quickly become irrelevant if you don’t modify it according to the situation. Let’s say, you are integrating a new service and you hire a new service integrator. Your service level agreement must change in order to accommodate the new stakeholder otherwise, you won’t be able to get the same level of service quality.
Which best practices do you follow when creating a service level agreement? Feel free to share it with us in the comments section below.