Outsourcing Roadmap Index

Service Level Agreement

SLAs are an effective means to quantify the services to be delivered to users and to continuously improve those services. SLAs are critical with external outsourcing engagements because they form a vital part of the contract. Further, the quality of the SLA is one of the pilars of a healthy long term outsourcing relationship.

Developing SLAs involves the definition of service level requirements and related metrics. The SLA contents should be jointly developed and agree upon by the ITO service provider and the service recipient. Key factors to develop an SLA which is manageable and support successful long term outsourcing relationship are;

Risk and reward sharing

Flexibility

Mutual benefits

The SLA development process;

Identifying key indicators focused on the service recipient’s business needs and objectives

Defining service level objectives

Setting target metrics with clearly defined data elements

Establishing accountability for the achievement of the service level objectives

SLA contents

Executive summary

This is a summary section describing the general purpose of the document to meet or exceed the service- evel measurements that are mutually agreed on. This should include the purpose of the document and the duration of the agreement. It should define the stakeholders or ownership for the service levels agreed on within the enterprise and the scope of the areas that are included.

Scope and objectives of the services to be provided

Description of services

Within this section a detailed description of each of the services and the committed performance levels (service level baseline) associated with them is provided.

Service level metrics

Definition of the metrics applied to measure and report the actual performance levels.

Definition: the service (function/process/procedure) that is being measured, reported and improved.

Acceptance criteria and baseline service standards

Measurement time frame and frequency: The dates and times when the defined metrics is to be measured, usually indicating the inclusion or exclusion of certain days.

Service level metric: Relevant measurement of required work performed by the organization. The service levels are commonly measured in percentage terms or can be expressed in terms of business performance.

Reporting period, format and frequency

Escalation management: Describes who is notified and under what conditions as out-of-compliance situations occur, including day-to-day and measurement period out-of-compliance situations.

Contractual/exceptions/penalties/rewards: Describes any contractual exceptions, penalties and rewards that are applicable

Service Level Management

Processes need to be documented regarding the management of service levels, including: measurement tracking and reporting, business continuity, problem escalation guidelines, service/change requests management, new services implementation, approval process and the service level review process.

Roles and Responsibilities

This section outlines the roles and responsibilities of all the parties to ensure that the service objectives are met. It should also identify governance and/or key stakeholders managing the SLA

Managing service level agreements

Service Level Reports (SLR) are the primary tools to manage SLAs. The SLR should be produced regularly. The report should state expectation for the reporting period and how the organisation meets these expectations. The SLR contains all SLA metrics, which are applicable for the reporting period, any events related to meet or exceed SLA requirements, explanation of any deviation from SLA baselines and recommendations for improvements.

The SLR is reviewed by the team leaders for completeness and accuracy. The review process answers questions such as:

Is the SLA complete. Have all services/processes been properly described and measured? Is it necessary to adjust the SLA?

Are the used metrics appropriate? Do the numbers have a meaning in order to;

meet SLA requirements

improve the processes

show problematic areas

help to manage the project

warn early about possible bottlenecks and risks

Do the numbers reflect actual processes?

Does the data capture process appropriate?

Do the numbers show any unusual deviation? Can they be justified for the reporting period?

Creating valuable and meaningful SLA metrics

Define and harmonise the business goals, objectives and strategies

Identify key processes important for service delivery

What are the most important success factors and issues to meet business goals.

Select metrics – well selected metric

indicate how well the process is performing

indicate how much the business goals and objectives are met

can be reproduced

data can be easily and cost-effectively collected

is one that the customer thinks is important

is important and required by the customer, senior management, project management

Collect, verify and maintain data

Visualize and analyse process behavior, trends and relationships.

Evaluate and improve process performance

Evaluate and improve SLA metrics strategy and management