SLA 101

There is a famous quote which says “What gets measured gets Managed.”

In today’s competitive world this quote holds high importance.

The biggest concern of companies considering outsourcing is their ability to effectively manage supplier performance. Service Level Agreements (or “SLAs”) are one way to help manage supplier performance.

What is an SLA?

A service-level agreement (SLA) is a contract between a service provider and it’s internal or external customers that documents what services the provider will furnish and defines the performance standards the provider is obligated to meet.

Why are SLAs needed?

A well-defined SLA records the expectations on both sides of the relationship and provides targets for accurately measuring performance against those objectives.

Service providers need SLAs to help them manage customer expectations and define the circumstances under which they are not liable for outages or performance issues. Customers can also benefit from SLAs in that they describe the performance characteristics of the service, which can be compared with other vendors’ SLAs, and set forth the means for redressing service issues.

What to consider when defining SLAs?

• Identify the most important SLA outcomes first and then determine clear metrics to track those outcomes.

• Ensure the metrics are relevant and match the key business needs of your SLA.

• The metrics should also be measurable/quantifiable and unambiguous.

• Metrics should be mutually exclusive and not duplicate each other. Each metric should focus on a different potential problem.

• Review and test the metrics, to confirm they will pick up the undesirable problems.

• Agree to the metrics between both parties – service provider and customer.

• Set up an automatic monitoring of the metrics, wherever possible.

• Monitor performance (metrics) on a regular basis.

• Review metrics and when required amend them.

Commonly used SLAs

• TAT (Turn-Around Time): Time taken to complete a certain task.

• MTTR (Mean Time to Recover): Time taken to recover after an outage of service.

• Response Time- Duration to Respond to a Service Request

• Resolution Time- Duration to Resolve a Service Request