sla of an outsource process - 1 service level agreements (slas) of an outsource process michael day...

SLA of an Outsource Process - 1

Service Level Agreements (SLAs) of an Outsource Process

Michael Day

MBA 731

October 29, 2007


What is an SLA?

• A service-level agreement (SLA) is a legal contract between two business parties, a service provider and the customer, that guarantees a certain measure of performance.

• SLAs provide service firms with the opportunity to rise above their competition when bidding for contracts.


History and Evolution of SLAs

• SLAs for technology solutions have been in existence since computers became widespread in businesses in the 1960s and 70s.

• Early examples of SLAs include availability and problem response times for office mainframes.

• As client/server computers and system networks became the norm, SLAs were established for network support.

• Since the explosion of the Internet in the 1990s, SLAs have become commonplace for important items such as web-site availability. Today, SLAs are very complex; a company that runs a software tool online can be a service provider in an SLA with its customers who are using its tool, but also be the client in a separate SLA with a service provider that guarantees its network is actually online.


Concept /Principles of SLA

• Set expectations and establish a relationship between two parties.

• An SLA is not really a guaranteed level of service; it is more like insurance in case a level of service is not met, generally in the form of financial penalties.


Techniques and Deliverables for SLAs

• Address the following issues:– 1) What work will be done

– 2) How the service provider will perform the work

– 3) How performance will be measured

– 4) What will be the penalties if performance does not meet expectations?

– 5) What procedures are required to modify the SLA?


Major Components of an SLA

• Scope

• Range of services

• Time (hours of the day) service is expected to be performed

• Response times

• Response process – including who to contact if response is delayed

• Documentation process

• Performance Evaluation

• Client obligations – such as cooperation with the service provider and a timeframe with which to request changes

• Termination clauses


Key Concerns

• Ensure that demands and expectations are realistic.

• Communication must be open when developing the SLA.

• Those defining the SLA must consider the infrastructure and other technology being used; the SLA must reflect the circumstances, it should not be too general.

• Cost is a factor: the contract cost will go up with more ambitious performance goals.


Where will it be applicable?

• SLAs are common in IT outsourcing contracts. One of the most common examples is help desk support: in general, the service provider will be expected to respond to help desk requests within a certain period of time.


Why do we care?

• SLAs are important because they push performance and specify customer satisfaction.

• Customer service is the main focus.

• Penalties for non-achievement ensure that both parties are confident the performance goals can be met, a key factor in establishing a business relationship.


When would someone use it?

• Client is not pleased with support from current service provider, whether outsourced or in-house.

• The first time a new service provider is brought in, a customer may request an SLA to feel more confident about the competence of the outsourcing vendor, and to minimize the financial risk in case the vendor fails.


What are similar approaches available?

• Could simply set up a contract with an unconditional out-clause, allowing the termination of the contract for any reason or no reason—this certainly provides motivation to the service provider and is less time-consuming to develop than a formal SLA. The drawback is that the service provider may not be fully aware of the expectations, or the expectations could change.

• Rather than outsource, the service can stay in-house. In-house organizations would, in theory, be motivated to succeed for the sake of their own company and their jobs. SLAs can exist even among different in-house organizations.


How should one go about implementing an SLA?

• 1) Gather background information; determine what level of service your organization truly needs.

• 2) Make sure the required level of service can be reasonably guaranteed. Both the client and the service provider must agree it’s reasonable.

• 3) Determine how detailed and comprehensive the SLA should be; the more detailed, the more expensive.

• 4) Within the SLA document, be sure to specifically state the service provider’s responsibilities.

• 5) Negotiate with the service provider on problem-response timeframes.

• 6) Include a process for evaluating performance and enforcing compliance with the SLA.


How should one go about implementing an SLA? (cont’d)

• 7) Once steps 1-6 are completed, the document created should be considered a draft. All parties with a stake in the SLA (such as multiple organizations within each company) should have a chance to review the draft.

• 8) Revise the draft based on the review.

• 9) Once the document is generally agreed upon, allow an adequate time period for notification and training of staff, as well as further development and revision and review of procedures for meeting responsibilities listed in the SLA.

• 10) Once the SLA is launched, ensure that regular meetings between the two companies occur to maintain a working business relationship and provide feedback on improvements that can be made.


References• 1. IBM, Judith Myerson. “Use SLAs in a Web services context”. 2004. URL:

http://www.ibm.com/developerworks/webservices/library/ws-sla/

• 2. Sun Microsystems, Edward Wustenhoff. “Service Level Agreement in the Data Center”. 2002. URL: http://www.sun.com/blueprints/0402/sla.pdf

• 3. Network World, Shally Stanley. “Strengthen Service-level Agreements”. 2002. URL: http://www.networkworld.com/careers/2002/0506man.html

• 4. Karten, Naomi. “Articles on Establishing Service Level Agreements”. 2006. URL: http://www.nkarten.com/sla.html

• 5. Business Link. “IT Support for Your Staff: Establishing Service Level Agreements”. 2007. URL: http://www.businesslink.gov.uk/bdotg/action/detail?type=RESOURCES&itemId=1075689257

sla of an outsource process - 1 service level agreements (slas) of an outsource process michael day...

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