Minimizing the Cost of Missed SLAs

by Aug 10, 2020

A service level agreement (SLA) is a document that defines the level of service that a customer expects from an IT vendor or supplier. It is commonly used by outsourcing companies and cloud providers as a means of solidifying the details of their offerings to prospective clients. SLAs can also be beneficial for monitoring internal processes that support customer contracts.

SLAs are a legally binding agreement that can have a variety of penalties levied to address violations or missed service levels. The types of penalties frequently imposed include:

  • Financial penalties that can in some cases amount to a reimbursement of the full amount of the agreement;

  • Service credits for future work or activities already performed;

  • License or support extension to provide additional services at no charge to the customer.

None of these penalties are appealing from the perspective of the vendor. They all directly impact an organization’s bottom-line. Failed or missed SLAs have other detrimental effects on an IT provider. Retaining and attracting customers can be difficult with a history of unfulfilled SLAs.

For these reasons, it is important to ensure that your enterprise meets its SLAs. Part of meeting this challenge is designing agreements that satisfy your customers while enabling you to meet their demands.

Choosing the Right Type of SLA

There are three basic types of service level agreements that can be used by an organization.

External SLAs track services provided to external customers. As the provider, you are expected to furnish reports documenting levels of service to the customer.

Internal SLAs are used to track internal operations. They are useful for monitoring internal processes to ensure they meet the expectations of external customers.

Outsourced SLAs pertain to services provided to you by a third party. These services can be instrumental in allowing you to fulfill external SLAs.

Many tiered SLAs used in business encompass multiple layers that include all three types of agreements to completely address service scenarios.

Creating Viable SLAs

The key to using service level agreements are the metrics that are measured to determine if the provider has met the terms of the arrangement. The specific metrics vary according to the type of service being offered. Some of the most commonly used metrics are:

Service availability – This is one of the most basic metrics that can be used and measures the percentage of time that the service is made available for use. The acceptable degree of availability can fluctuate based on time slots or business requirements. Critical systems may demand that providers guarantee and produce an uptime of 99.999 percent or face financial penalties.

Defect rates – The number or percentage of errors or process failures is another metric that is often included in an SLA. The defects can include items such as missed deadlines, failed backups, and incomplete restores.

Security – Security assurances are becoming increasingly important as organizations struggle with data privacy and security concerns. Measurable security measures such as timely patching and installing antivirus updates may be part of external or outsourced SLAs.

Business results – Customers often insist on incorporating business process metrics into SLAs. These rely on the ability to calculate the vendor contribution to key performance indicators (KPIs).

When developing SLAs it is important to make sure that your organization can meet them. While this may sound obvious, it can be tempting to oversell the technical abilities of an enterprise in the competitive world of IT outsourcing. This strategy may result in a temporary increase in the number of new customers you attract but can have disastrous long-term effects on your business.

Creating a viable SLA requires a clear-eyed view and understanding of the capabilities of your organization to meet customer expectations.

Monitoring SLA Performance

Monitoring the SLAs your organization is expected to fulfill is critical to its success in meeting the agreements. Keeping apprised of the IT environment’s performance related to specific agreements can help address potential shortcomings before they become missed SLAs. Taking the appropriate corrective action can be the difference between satisfied customers and getting out the checkbook.

IDERA’s Uptime Infrastructure Monitor provides your IT department with an application that can help minimize the occurrence and associated costs of missed SLAs with an assortment of features.

  • Monitoring and alerting capabilities address and troubleshoot SLAs before they are missed.

  • Reporting can be customized to furnish a detailed view of all infrastructure elements that impact SLA delivery.

  • Testing SLAs based on past performance before committing to them allows you to be certain you can meet your targets.

  • Create customizable SLA dashboards that can be used by the entire organization or a subset of stakeholders.

Uptime will keep your enterprise informed regarding the current state of your SLAs and avoid unpleasant surprises. With well-structured SLAs and Uptime, your organization will be better able to reach profitable agreements and satisfy its customers.