A Service Level Agreement or SLA defines the level of service that will be provided by a solutions provider. It establishes goals, responsibilities, how to measure performance, response and resolution, reporting and escalation, contacts, remedies and penalties. SLAs:
- Outline expectations with the solutions provider during service level development.
- Create a culture of high-quality service and accountability both internally and with the solutions provider.
- Formalize duties and responsibilities of each party.
- Set benchmarks that each party expects the other to achieve.
- Clearly set remedy and penalty targets for non-compliance with service levels.
- Bring alignment in performance reporting for the client and solutions provider.
An SLA should identify the responsibilities of the solutions provider. It should also identify dependencies with network and IT service providers that the solutions provider will work with on behalf of the client and responsibilities of the client.
Below are seven critical elements for all SLAs.
- Goals of Clients and Solutions Providers
Clearly defining the goals confirms that everyone has alignment with the same understanding of requirements, priorities, and responsibilities. As a result, it will ensure that when the solutions provider reaches its goals, the enterprise can meet its program’s objectives.
- Responsibilities for Both Parties
SLAs should also describe what they might need from the other party to help them hit their targets. For example, to meet savings targets, a solution provider will need copies of all contracts and timely responses from the client on cost saving recommendations.
- Definitions, Performance Measurements and Frequency
Key terms for performance, monitoring, measurements, reporting and their frequency are critical. It should also include sample reports and how clients will access the information.
- Response and Issue Resolution Time-frame
Response time-frame is the time period by which the solutions provider will start to investigate an issue. In many cases, it may not be possible to establish when an issue will be resolved ahead of time. Resolution will often depend upon third parties like a network service provider or client.
- Steps to Report Issues, Escalate and Contact
There should be a clear explanation of how to report problems and how to escalate issues. Escalation of issues should include points of contact that identify which team members are responsible for different areas and who to contact if it is necessary to escalate an issue.
- Penalties and Rewards
If the solutions provider fails to meet a goal, which the solutions provider can control, there need to be remedies. The SLA may include a penalty or reductions in compensation against the cost of the program with “service credits.” There should also be incentives for the solution provider to “earn back” these penalties and even receive bonuses for performance that exceeds the SLA standards if it drives greater benefits to the client.
- Change Management
Clients and Solutions Providers must monitor and manage the SOW and SLA and plan for updates during the term of the relationship. Major changes in the SOW and SLA may require revisions to the contract without triggering re-bid of the project before original contract term is complete.