This posting is inspired by a question on LinkedIn around whether anyone really cares about SLAs. Let’s be frank – some people don’t. Service Providers who don’t care about SLAs are typically of low capability and deliver a poor service. Clients who don’t care about SLAs typically are in a high revenue phase and aren’t really focussed on cost. As a person who has spent years working with clients who want to manage SLAs I have learnt that the problem is less about whether people ‘care about SLAs’ and more about whether they have ‘the capability to manage them’. I believe this capability needs to exist on both on the client and the service provider side. Firstly here are some good reasons why you should care about SLAs.
- Risk Management – service levels are carefully agreed to ensure that the client business receives the level of service needed to deliver a return to shareholders. Where these service levels drop below the agreed level it will create a risk or even an issue for the client business. The absence of any information on actual service levels makes it impossible to assess risk levels based on poor quality delivery.
- Cost Management – the cost of an outsource or managed service deal is directly related to the level of service provided. Paying for services without tracking service quality is like buying goods in a supermarket with a total disregard or concern about quality. (as if saying I am happy to pay $100 for a bottle of sparkling water or premier cru champagne – as long as it quenches my thirst…)
- Deal renewal – knowing the level of service which allows a client business to function is essential when renewing a deal – potential new service providers will need this information to provide you with an accurate estimate – going back to the drawing board on this and baselining can be a timely and unnecessary activities if you have been getting accurate information on service levels.
- Expectation Management – very often a transition from a traditional operating model to an outsource or shared service involves a deliberate change in the level of service – often to secure cost savings. If service levels are not clearly communicated and understood then the level of service may be perceived as an issue – when in if fact it is aligned to the requirement.
- Ensuring compliance with statutory and regulatory requirements – in many sourcing arrangements clients will be held accountable for compliance and also will be required to demonstrate active management of deals (in Europe note Solvency II and MiFID)
- Ensuring effective interaction between client and service provider – quality of service delivery and contract fulfilment are key element of the sourcing relationship – in the absence of consistent and commonly agreed information on both of these areas then it is very difficult for client and service providers to have meaningful interactions – relationships where service levels are poorly understood and discussed are characterised by endless discussions around issues with no real understanding of how those issues relate to the service agreement.
- Reviewing Service Design –the SLA is a commitment to deliver the service designs – without tracking adherence to the service design it makes reviews very difficult as you don’t really know how well the service design is working. (note: if the SLA is all green and client satisfaction levels are low – then the service design is not fit for purpose. Without tracking SLA and Satisfaction you’ll never know!!!)
And what about capability?
Capability refers to the ability of an organisation to perform actions. My experience in the area of sourcing capability is derived from training on the eSCM model. The is a Capability Maturity Model for sourcing which clearly outlines best practices which organisations should follow to achieve high levels of sourcing success with minimum risk. Early adopters of this model include La Poste in France and the Lloyds Group in the UK. The Practices of interest in the context of SLAs are called ‘Sourced Service Management’ – whilst they address the area of SLA Management they also underlie the importance of structured governance more generally. I think this is the right approach – SLAs, Issues, Risks and Actions on sourcing deals all need to be managed in a structured framework which is capable of being analysed and scored from a performance perspective – without the ability to do this it become impossible to assess the level of value your arrangements are adding. Typical practices include;
- Performance monitoring – measuring SLAs etc.
- Relationship Management – fostering realistic expectations on service provider performance, managing issues etc.
- Managing Changes – dealing with managing changes to service or service levels
- Value Analysis – focussing on overall performance against commitments.
The model provides great guidance on the ‘What should I do?’ and it is publicly available and free – so no excuses :>))) The resistance to implement effective governance has been driven by the lack of availability of low cost governance tools which can be deployed rapidly – what client and service provider organisations need are collaborative tools which create a platform for reporting on all SLAs, Issues, Risks, Actions etc. Tools that alert users when service levels drop below acceptable levels. Tools that allow both clients and vendors to weight each KPIs and score the overall SLA – where SLA dashboard summaries can be produced at the click of a button. Filling in spreadsheets on these matters can be effective – but typically suffers from human error – either by putting in the wrong data or forgetting to do it at all. Using a tool which can alert you when you need to put in the performance information and then automatically calculates the performance level can make all the difference! That’s why we built ServiceFrame. It was built by users for users – our customers get up and running within 48 hours at very low cost. If you want to get more rigour around your SLAs, Issues and Risks – and you are a service provider or client – just let me know!
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