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Understanding Service Level Agreements (SLA)

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Service Level Agreement between software company and customers
SLAs are a contract between customers and service providers.

Have you ever ordered from Amazon and been given the option of Amazon Prime shipping. This feature guarantees the speed of product delivery from Amazon to the customer. This is a prime (pun intended) example of a Customer Based Service Level Agreement, promising to uphold their delivery time quote.

However, if the company does not deliver at the intended time leaving the customer unsatisfied with their services, there may be a predetermined compensation or other offers if the mistake was due to internal efforts. This ensures that customers are more likely to continue using their company’s services in the case of an error.

What is an SLA

A Service Level Agreement is essentially a contract between the customer and business that defines the standard of the service provided. SLA’s ensure customer satisfaction as well as company success/reputability. It may outline the quality, physical properties, and timely nature of the product. SLA’s can be utilized by companies internally or externally:

  • Customer based SLA: This is a service level agreement between your company and an individual customer or a specific group of customers.  
  • Multi-level SLA: is a customized agreement split into different levels designed to fit the specific needs of multiple customers seeking the same services.
  • Internal SLA: involves an agreement among an organization and its internal employees service standard rather than customers. 

SLA’s in the Tech World

 In the Information Technology (IT) world SLA’s may be used to guarantee the quality, availability, and timeliness of the software provided to the customer. Although SLA’s can be used between the customer and company, they may also be used internally within a company or combined on multi-levels. Further we will discuss the different ways in which SLA’s can be utilized in your IT business:

When writing an SLA agreement it is important to incorporate all inclusions and exemptions in the contract. This ensures that each counterpart is working under the same impression, minimizing the risk of mis-communication as the contract provides clear expectations. However, if an issue arises, individuals may refer back to the contract to determine further action.

1. Customer based SLA

In a customer based SLA, the customer and service provider negotiate specific expectations of the services that will be provided. This type of service level agreement can vary from customer to customer accommodating to their individual needs. For example, a customer based SLA at a software company may define the specific amount of time required to respond and resolve any customer inquiries.

2. Multi-level SLA

Multi-level SLA’s are used for different customer groups with varying needs where each group is provided with the same level of service at different quantities. This type of SLA can be divided into different tiers including corporate level, customer level, service level, and issue based.  This allows customers to select the proper service plan based on their requirements. For example, an IT company providing a software service plan may have various groups of customers ranging in size. This means the company is providing the same software at different price points relative to the number of users at each company. SLA contracts may be vary based on the value of the customer.

3. Internal SLA

Internal SLA’s can be used within companies for purposes such as connecting teams to work cohesively towards improving company success. For example, this may be acquired by creating a contract agreement between the IT Department leaders and the internal customers they serve. Metrics that can be pre-defined are first time response once the service request has been submitted and total time to resolve the issue. These key performance indicators (KPI’s) are typically measured over a period of time and presented as a average. This ensures each counterpart is responsible for a specific service standard within the internal functions of the company. 

Important Factors to Include in an SLA

SLA’s must incorporate many different aspects into the agreement including a detailed description, exemptions, availability standard, service standard, penalties, and data handling method. It is important to the contracts viability to properly outline each, ensuring both parties hold up their end of the agreement.

 

Key Agreements to Include In Your SLA

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SLA Agreements

A service level agreement (SLA) is an official agreement between a service provider and their customers that specify what level of service will be delivered as it relates to response and resolution times. It is important for companies to have SLA’s since these agreements set well-defined boundaries and expectations for the service provider to meet. Imagine you run a business and you work with a service provider in which expectations you have are not being reached. The problem here is a miscommunication between the client and service provider, where the expectations were not clearly made. An SLA allows for limited confusion on either the service provider or endpoint client’s part, as long as all the requirements are met throughout the contract. Also, if any conflicts arise during the service period, both companies can turn to the SLA to determine the outcome of their feud. An SLA can range from having simple to complex agreements. However, there are key agreements to include in your SLA.

Description of Services

The first necessary agreement is created by the service provider, pinpointing exactly what services and products the business offers; alongside a very detailed description of each one. The description must be honest, including the companies weaknesses and strengths, that highlights to the client what you are capable of, so that no unexpected surprises come up in the future. Having this aspect of writing clearly defines to the client what products you do and do not offer. These descriptions must be as specific as they can be, no assumptions are to be made and clients remain happy.

Context Setting Information

This can be seen as the original “purpose” of the SLA. Identifying the overall purpose for signing with your clients sets the bar for the service provider and highlights the criteria that should be met for the agreement.

Service Standards

It is very easy for either party involved, to become confused about what is required from the service provider. Having both parties acknowledge the conditions under which the service will be provided assists in keeping the agreement clear and successful. Agreeing upon unique service standards, between both the service provider and client, will help clear up any confusion regarding duties.

Service Reports

As the service provider, it is on you to make sure you are pinpointing to your clients the progress and impact the service has. Service reports should include the main aspects made above, that clearly show the effectiveness of your service to the client. This should include metrics that distinctively demonstrate your performance.

Regular Reviews

It is very important for both parties to meet regularly to communicate and review the performance of the service that the agreement made was built on. Service reports are good representations of progress to present during these reviews to show the overall effect made so far. If the relationship is going well between the provider and client, continue keeping good communication, no matter how well the performance is, to continue executing the standards.

Being specific on the key requirements and standards is the most important aspect when forming an SLA. When all aspects and service descriptions are made clear early on, it can reduce confusion and future conflicts between both parties. Incorporating the key aspects referenced earlier can help set goals and expectations early on, clarifying the caliber of the service being offered and the standards that should be met. SLA’s are not set in stone and can be modified throughout the time period if expectations or services want to be changed. In order to be a successful service provider, SLA’s are a very important key. With this, your service will be delivered to its greatest potential to the client while keeping your customers or clients happy.

Contact Entry Software to get a demo of an SLA tool.

How SLAs Solve Business Issues

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We’re working together with a long-time user of TeamHeadquarters, who will be using SLAs to solve business issues and who has recently developed a business strategy that establishes IT as a core organizational competency.

The Business Issues

Internal business issues

The strategy of the company has software, databases, and processes that heavily rely on systems and IT personnel for high availability and accuracy.

Not all systems, software, processes and staff are equal — some are more critical than others. Applying an SLA to these essential services provides helpdesk operators and personnel the information they require to prioritize support activities and service requests.

Customer business issues

As I said, not all systems, software, processes, and staff are equally essential. Customers service requests receive a priority based on their essential nature and assigned the appropriate SLA. Now the client expectations are set. Providing the customer with the measurements, and access to their service request progress through the TeamHeadquarters portal aids in understanding the level of service they’re receiving and whether the SLA is being satisfied.

SLA Measures and KPIs

By setting SLAs on all services based on their essential nature, the client can focus the efforts of IT on high priority, strategy enabling activities.

For each SLA Measurements and KPIs have been declared and agreed upon by both customers and IT. The primary measure is time: time to resolve, and average time to close.

Factoring in weekends and off-hours into the SLA time measures was critical to the success of the strategy. If the “ball” is in the client’s court, the SLA clock stops; if the request arrives after hours, the clock doesn’t start until the beginning of the next business day. These types of rules are critical to the development of realistic expectations.

IT support staff are measured on their average time to close, the total time to close support requests, SLA violations. These statistics become tools to improve service delivery and train staff.

Customer Engagement through a Self-Serve Portal

Customers become aware of KPIs and the real measurement of support. Clients have access to Service Level KPIs which provides a perspective of the service they’re receiving.

The customer and their executive team determined that TeamHeadquarters is a critical system that supports the IT strategy of their organization. SLAs support both the client and the IT helpdesk.

How to Measure Service Level Agreements

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As an IT Manager, you are tasked with developing to measure Service Level Agreements, (SLA), understanding compliance to the SLA and taking corrective action when violations occur. Help Desk systems create significant volumes of “dark data” that, when mined, provide insight critical to achieving organizational service and customer satisfaction objectives.

Let’s look at the types of information you can use to measure service level agreements.

We can consider that there are different reporting objectives when measuring SLAs.

  1. Customer specific – did we meet our goals?
  2. Staff centric – how are our team performing and are there any trends that are contributing to SLA violations?
  3. System-centric – are there patterns in your IT stack that are creating an abnormal trend in SLA violations?

Ideally, you will isolate six to twelve metrics that will help you answer the questions above.  Here are some examples for you:

Customer specific metrics:

  • reaction time,
  • resolution time,
  • compliance to agreed deadlines

Staff centric metrics:

  • Abandonment Rate: Percentage of calls abandoned while waiting to be answered.
  • ASA (Average Speed to Answer): Average time (usually in seconds) it takes for a call to be answered by the service desk.
  • TSF (Time Service Factor): Percentage of calls answered within a definite time frame, e.g., 80% in 20 seconds.
  • FCR (First-Call Resolution): Percentage of incoming calls that can be resolved without the use of a callback or without having the caller call back the help desk to finish resolving the case.
  • 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.

We have reviewed what to measure now let’s cover the how to measure aspect.

Of course, if you have a tool that will pull all this data together for you into a single view, then that is the ideal.  However, if not, then here are some critical considerations for you:

  1. Keep the number of metrics small, six to twelve, no more. If you have too much information, it will be difficult to wade through and challenging for anyone to assemble regularly.  Too many metrics could lead to the abandonment of this important process.
  2. Trend the data over a period. I suggest that you have thirteen weeks of data to compare and graph.
  3. Because you want to see how performance is comparing to the goal, make sure that you put the goal beside the metric.
  4. Incorporate this report into you weekly team Traction Meeting and use it to identify SLA, team or IT issues. See Six Ways to Strengthen your IT Organization.

Entry Software has been working with IT organizations since 1998 and can help you develop your Service Level Agreements, and provide you with the information you need to measure them.  Learn more about their integrated help desk and project management solution, TeamHeadquarters or get a demo of TeamHeadquarters today.