What is a Service-Level Agreement (SLA)?

SLA is a very fundamental component of a vendor’s contract. This is because it assesses the degree of services that the client expats from the service provider or vendor. It also comprises the metrics to measure these services and has the necessary remedies and downsides if the required services are not up to the mark. The agreement can be between the company and an external supplier or internally between two departments of the same company. 

Why is an SLA required?

• This contains information for all contracted services and the customer’s expected outcome in a single document for convenience. 

• To eliminate ignorance on the side of either party in case of any mishap in the provision of demanded services as an SLA marks all the metrics and responsibilities of both the provider and receiver. So both are liable. 

• Both sides are able to comprehend the gist of the agreement and work collaboratively without misunderstandings. 

• Any settlement without the appropriate SLA (under supervision of an authentic legal counsel) can be susceptible to advertent misinterpretation. SLA protects both parties in the contract.

• If the SLA is not in line with the technology or business motives of an arrangement, this can potentially be harmful for deal pricing, customer experience and the quality of service or delivery. 

SLA mistakes that IT leaders need to be caution about

Being meticulous about crafting the perfect service-level agreement is vital for IT companies working with IT service and cloud providers. Covid-19 has magnified the demand for well-balanced SLA policies. It fulfills the level of services and performance the client requires regardless of the client or buyer’s location, the impact of the pandemic or the customer’s ability to interact/buy. Nevertheless some points of contention become evident not only between the supplier and customer but also within the organization when IT leaders make a few errors.  

Not practically devising SLAs

Sometimes when both the service provider and client presume that there is a mutual understanding upon the clauses agreed upon earlier, they don’t draft an SLA ip front.  According to Wendy M. Pfeiffer, CIO at Nutanix the “A” in SLA must be given paramount attention for agreement isn’t supposed to be a one-sided thing. It requires consent from both sides regarding the quality of product and services, monetary dealings based on expectations, and agreeing to outcomes in exchange for investments.

Ignoring Security Conditions

The provider must ensure that security clauses are part of the engagement such as those including disaster management, encryption, handling incidents or vulnerable situations. Therefore, it is the customer’s obligation to urge suppliers to address security policies in the SLA.

More Attention to the Penalties

Using SLAs as a source of restoration earning instead of a performance driver inculcates disputes without any business payoffs. There is no use of dwelling on clawbacks, once the damage is done, the IT leaders should directly hold the supplier accountable. 

Moreover, setting high standards for service expectation is one-sided for, if under performance draws clawbacks, then over performance should also provide revenue incentives.

Many SLAs

Having a large number of SLAs is also cumbersome as this dilutes the impact of each one and the vendors aren’t able to differentiate between which SLAs are the most important ones. An abundance of SLAs breaches the agreed level of service commitment. For instance if a customer has 65 SLAs and the at-risk amount is only 10% of monthly fees, the breach of one results in a service credit that is 1/65th of 10%.

Unable to understand the Provider’s perspective 

The IT leader may care more about the services being provided but the SLA should be focused on the agreement clauses put forth by a third party. In case of disaster recovery or backup, the company should include recovery point objective (RPO)/recovery time objective (RTO) in its agreement. 

Absence of Escape Clauses

The contract should certainly include stances under which a party can be excluded from the obligation of the agreement. This is required in case of poor performance and the SLA will be more effective if everything is mentioned clearly in it. The SLA should be regularly viewed with the vendor for eliminating any ambiguities. 

Inability to properly measure SLAs

Although setting performance metrics by IT companies through adequate data is needed, it may not always be provided for. The already understood and used tools may result in irrelevant and ignored SLA management. The recent discovery tools to measure SLA identify the most meaningful metrics and objectively measure performance (e.g., cycle time, quality, compliance). 

Viewing SLAs as a one-time exercise

IT companies should manage their SLAs well for a better value realization when the customers engage with the products and decide the service expectation for their business. This is necessary for positive business outcomes and service integration.

Missing IT representation on Shadow Deals

When lower-level directors sign deals with a large number of services under the compliance of business contracts for their own tech services, the enhanced risk exposure is not only in terms of SLAs but also the reverting costs for the mistakes.

 Assumption that SLAs don’t matter in the cloud

A lack of understanding of how SLAs intersect with cloud services and applications is a drawback. The network service providers allow data transfer until the traffic is handed to the public cloud provider. Every service highlights the SLA and the contract should cover those clauses.