ONE OF THE MOST CRITICAL STEPS WHEN CONTPtACTING an IT service provider is setting the performance metrics of service-level agreements (SLAs). Unfortunately, many organi- zations treat this as an afterthought, says Ian Hayes, founder and president of Clarity Consulting, a Beverly, Mass.-based provider of training and development services.

As an IT management consultant with expertise in vendor negotiation and contract development, I layes believes orga- nizations could get more out of their service providers if they put more up-front thought into their SLAs. These agreements are more than just setting terms of service and expectations; they define the relationship hetween service providers and their clients, as well as performance measurements and penal- ties for performance breaches.


The following are Hayes’ five best practices for effective SLAs.

1. Establish Business Metrics Define business objectives for obtaining the service and establish metrics to measure how well the service is meeting these objectives.

“If I’m the businessperson, all I really care about is that the service is working the way I want it to work,” Hayes says. “I don’t really care about the details of whether it was 99.7 uptime or 99.9. I only care whether I got it when I wanted it.”

2. Estabiish Operations Metrics Once you’ve set business metrics, also set operations metrics to aid the IT organization’s monitoring of day-to-day ser- vice performance, and identify performance problems and lapses. Operational metrics should include theses categories: volume, responsiveness, quality and efficiency.

“Any one of these metrics [alone] doesn’t tell you enough,” Hayes says. “Say you are driving in your car and you have a dashboard with all of these measurements. If you only look at the speedometer, it will keep you from getting tickets, but if you go on a long trip, you’ll run out of gas. You reallv need the whole set of metrics to give you a complete picture of how the car is running.”

3. Hoid Service Providers Accountabie If you’re going to measure a service providers’ performance, you need to have controls, procedures and penalties for when

service falls below contractual requirements. Many SLAs set parameters for how quickly a provider must respond to remedy a performance lapse or break in availability—this is particularly important for managed service agreements. The SLA should specify penalties if the provider fails to correct the problem within prescribed limits.

SLA accountability requirements and accountability go both ways. A contracting company must deliver on Its require- ments to deliver access to infrastructure, information and materials so the service provider can meet expectations.

“Make sure the metrics you are holding the vendor account- able for are metrics that are within the control of the vendor,” Hayes says. “The best way to do this is through two-way SLAs.

In the two-way SLA for development, for example, the vendor would say,’I will deliver software to you on the date agreed upon if you get me the specs by the following dates and It is to the following level of complete- ness.’ If the client then fails to meet Its terms of the agreement, the vendor isn’t held accountable for that.”

4. Exercise Penalties and Incentives Metrics provide companies with some insurance against poor service. However. IT and project managers should exer- cise restraint and rational thinking when

applying penalties. In some cases, IT managers may consider offering incentives to service providers rather than fining them for poor performance.

“When putting a penalty or incentive in a contract, you really have to think through every angle,” Hayes says. “What possible side affects could this cause that you didn’t mean to cause.-*”

5. Measure Third Party Experience The ultimate measure of service success is the user experi- ence. Standard SLA metrics mean nothing if the users (out- side clients and customers or in-house employees) find no value in the applications and services provided. Companies should survey users for their satisfaction and make adjust- ments based on their ratings, experiences and suggestions.

“If your vendor meets the metrics and you do a customer satisfaction clause and end users are really unhappy, then you must not be measuring the things they care about,” Hayes says.


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