Implementing a service level agreement.

Introduction

This checklist is for managers who need to draw up and implement a service level agreement (SLA). Although this checklist draws on examples from information technology, it may be used for agreements in any context. It does not cover service level agreements relating to the appointment of directors.

SLAs were originally used mainly for third party provision of information technology services. In more recent years, there has been a more substantial growth in the number and range of services outsourced, as more and more organisations have sought to reduce costs by focusing on core activities. Activities outsourced include the entire human resource management function, payroll administration, and facilities and fleet management. A SLA can be used inter-departmentally within a company, as well as between organisations, providing a valuable baseline for partnership and outsourcing arrangements.

A SLA should not be confused with a warranty or guarantee that comes with a product or service, where the manufacturer or provider determines the level of after-sales service that the customer can expect to receive. The customer usually has no say.

The advantages of implementing a SLA can include:

a) Making the user plan ahead for services required and also make them more aware of the costs of service provision

b) Establishing understanding as the basis of meeting expectations and encouraging the user to monitor and measure the efficiency and effectiveness of services provided

c) Encouraging the provider to plan for the development of services offered, making the provider more accountable and responsible for the services delivered and helping to prevent or resolve misunderstandings in the levels of user priority

National Occupational Standards for Management and Leadership

This checklist has relevance for the following standards:

E: Using Resources F: Achieving Results

Definition

"An agreement between the provider of a service and its users which quantifies the minimum quality of service which meets the business need." Hiles, A (1993 Service Level Agreements (see Additional Resources at end))

Hiles stresses that this terminology is deceptively simple, in that:

* the agreement is the result of negotiation which recognises the needs and constraints on each side

* the agreement records and measures the level of service to which both parties subscribe as the requirement to meet needs

* the word 'minimum' implies 'adequate to meet quality needs' (those that serve the customer's needs and are acceptable to the customer).

Action checklist

1. Assess the current situation of service provision

Many agreements do not start with a clean slate. They may arise because of past problems. It is as important for the user to define the minimum levels of service required as it is for the provider to assess its current--and planned--resources and the current and planned demand. It is at this stage that levels of urgency and priority should be defined.

2. Draw up an outline agreement

SLAs should identify at least the following elements:

* the purpose of the agreement

* the parties to the agreement, such as the provider and user of the service

* the service to be provided

* the period of the agreement, with notice if appropriate

* arrangements for monitoring, measuring and review

* the mechanism for resolving any conflicts

* the procedure(s) in case of non-performance (what happens if either party fails to meet the terms of the agreement?)

* procedures for change control

* the degree of contribution and help from the user

* lines of communication 

* any charges, and insurance cover for both parties

* means of arbitration for unresolved disputes

The key elements which both provider and user will need to clarify are:

* the precise nature of the service to be provided including timeliness, relevance, accuracy, format

* limits to the extent--scope, range and hours--of the service

* response times--expected and deliverable

* any exceptions to the rule

* agreed methods for monitoring and measuring.

3. Negotiate the levels of performance

The SLA will usually emerge from discussions between both parties in the form of a compromise which recognises the highest level of service feasible and the minimum that is acceptable. Although what constitutes 'unacceptable' service should be obvious to both parties, it is still worth mentioning to avoid possible misunderstandings. Equally, a 'top level' service should be discussed--what is desired may be impossible due to excessive costs.

The customer must clarify the levels of service required and response times. For example:

* Priority 1: must take precedence for immediate treatment

* Priority 2: requires treatment within the hour

* Priority 3: can wait for a maximum of 24 hours.

Another negotiation point will be any charges, or cross-charges for the services, penalties for failing to adhere to the agreement, and what to do in cases where disputes cannot be resolved by the two parties.

4. Include change control procedures

Information technology will be renewed at an ever faster pace. While this will impact on agreement targets and measures, it may also influence the nature of the agreement itself. The agreement must take account of changing hardware and software, and the continuity--and improvement--of services to the user during the transition phase.

5. Consider contingency and back-up arrangements

Only in an ideal world can problems be solved in a flash and errors corrected at the touch of a button. The SLA must take account of this with due attention paid to risk management, which provides a measure of contingency and back-up (for example, for temporary operation of user services). Go a stage further with consideration of a disaster or crisis eventuality. Insurance may provide warmth that things may be put right in time, but can it answer the immediacy that users normally require?

6. Measure performance and monitor faults

Agree a mechanism for monitoring and measuring the actual performance of the provider against the agreement. This may be in terms of speed or effectiveness as well as cost. Agreed performance targets or indicators (which should be precise) are useful here to provide a benchmark which will, in due course, indicate whether the existing levels of service are satisfactory or not.

7. Pilot the SLA first

The introduction of the SLA is important: lack of preparation or fine-tuning may well determine its fate. A sensible approach is to run an initial feasibility study with a pilot user group--not large enough to cause potential widespread damage if things go wrong, yet large enough to draw conclusions and make modifications for general implementation. It should be piloted by a user group with a clearly defined level of service need.

8. Review the SLA periodically

Resources, demands and targets will change over time; the SLA is not cast in stone and should be reviewed on at least an annual basis.

9. Measure the effectiveness of the SLA

Records of the speed of response, length of downtime of the service and satisfaction with the solution can be rated against agreed performance indicators. The mean time between a failure and its repair/solution can provide an important indicator of the SLA. Response times can be reviewed against agreed service objectives.

How not to implement SLAs

* Be careful not to allow the SLA to be seen as being weighted in favour of the customer.

* Don't look at SLAs as an opportunity to cut resources. Be aware that providers may require extra resourcing to meet a minimum level of service and this could increase the cost of provision.

* Don't underestimate levels of demand on the service provider. It can be difficult to predict the level and nature of demand on the provider from all customers.

* Don't make the SLA difficult to monitor and measure

Additional resources

Books

The IT managers survival guide Rob Aalders and Peter Hind 

Chichester: John Wiley, 2002

Strategic outsourcing: exploiting the skills of third parties Ian Benn and Jill Pearcy Management Consultancies Association

London: Hodder and Stoughton, 2002

Complete guide to preparing and implementing service level agreements Sheila Pantry and Peter Griffiths 

London: Library Association Publishing, 1997

Service level agreements managing cost and quality in service

relationships Andrew Hiles

London: Chapman and Hall, 1993

This is a selection of books available for loan to members from the Management Information Centre. More information at: www.managers.org.uk/mic