Choosing the right supplier is not the only issue that businesses should concern themselves with when entering into a service level agreement. Problems, such as a mismatch of expectations and deliverables, can materialise if an agreement has not been carefully planned, discussed and documented.
More often than not, these difficulties can manifest into poor service levels and disputes as one or other party incurs loss of business, additional costs and commercial embarrassment.
Unfortunately, a lack of prescriptive best practice and the complex nature of technical issues, as well as regulatory and legal requirements, compound this.
To minimise the risk of these headaches, businesses need to assess and re-evaluate their SLAs to ensure both parties know what is being paid for and what level of service is expected. SLAs should define the services, set targets and include measurements by which successful delivery will be determined.
So what are the common mistakes that organisations make when drawing up service level agreements?
Mistake number one is having the contract and SLA in one document. As these documents address distinct and separate areas, this means that boundaries between the two are poorly defined.
Confusion can occur between legal and IT areas and the parties can often get into an unnecessary contractual-level discussion if the level of service detailed in the agreement needs changing. Any change to related service agreements and/or technical documentation may require the entire agreement to be reviewed and updated.
The second mistake is failing to ensure that the SLA is flexible enough to meet changing business needs.
The third main error is listing specific technology in the agreement, for instance, a particular piece of computer equipment, even though it might have a limited shelf life and be frequently replaced by manufacturers.
To avoid these pitfalls we recommend that users structure their service level agreements differently, breaking them down into five different components.
These five parts include:
- The master service agreement, which will contain solely legal terms
- The SLA, which will be more practical and be based on targets
- The operational level agreement, which will state what needs to be done on a daily basis and underpin contracts
- Details of third party relationships crucial to the contract
- Technical documents, which specify the standard technical specifications of the hardware and software to be supplied to the user.
Benefits of a tiered document include making it easier to change one part of an SLA without overhauling the whole document, removing inappropriate detail from documents and simplifying commercial relationships.
Putting these principles into place when drawing up an SLA should help companies avoid repeating the same mistakes.
James Mullock is partner at law firm Osborne Clarke, and Gary Holmes is managing director at IT consultancy Techpractice
This was first published in April 2004