ESSENTIALS OF SERVICE LEVEL AGREEMENTS
Service Level Agreement (SLA) is nothing but legally binding contract between the owner and the service provider, to deliver a service with a particularly service quality in an agreed price. It specifies what a customer wants and what the supplier is committing to provide. Hence service level agreement is not only a legally binding agreement but also incorporates the aspirations, requirements and the dreams of the owner along with the corresponding strategies and technical solutions guaranteed by the service provider. There are two major types of SLAS:
(i) B2C (ii) B2B
B2C: B2C service level agreements are the announcements made by various telecom, IT, ISPS and non-technology service providers announcing the service levels guaranteed by their companies to the public, including their customers. These companies make SLAS to tell their prospective and present customers, what is the level of service they are able to guarantee and if they fail to maintain their guaranteed service level what kind of compensation they give to their customer, who ended up in a lesser level of service than the guaranteed one. These SLAS are not negotiated and signed between the parties. They voluntarily adhere to the penalties in case of failure. Example:” Pizza delivery in 45 minutes, if we deliver it later you need not have to pay the bill” etc,
B2B: These are the agreements between two business houses i.e. the service provider and the commercial customer and the service are obtained to use in the course of business of the customer. These SLAS have normally an impact on the business of the customer in case of any breach by the service provider. These SLAS are required to be legally binding and enforceable contracts. Because of their complex nature they need to be negotiated, signed between the parties and if necessary registered also.
FUNDAMENTALS OF DRAFTING SLAS : 1.FINALISATION OF REQUIREMENTS BY THE CUSTOMER:
The customer or owner has to finalize the requirements before starting the process of calling of proposals from the service providers. If the customers are not fully sure of technical requirements they may prepare a wish list which describes the “expected user experience’ achieved by the contract. This normally happens because the technology is
changing each and every day. The proposals suggested by the service providers to the customer according to their requirements are like solution to the problem.
2.PREPARATION OF THE PROPOSALS BY SERVICE PROVIDER:
Service provider has to propose the options of implementing the agreement as soon as the wish list or expectations of customer, any restriction made by the customer in terms of budget, implementation period after service bank up cost, infrastructure, scope of expansion, requirement of human resources are narrated to the provider. The options should cover the aspects like solutions to the issues, cost effectiveness, requirement of manpower, implementation period, review meetings, meaningful metrics, reporting system, training to the customer, after service model and cost.
3.APPOINTMENT OF A NEGOTIATION TEAM:
In SLAS there are certain technical and legal aspects and in this situation alone owner cannot take effective negotiating deals and hence it is desirable to form a negotiation team who are well-equipped with the technical knowledge , customer aspirations, future development etc. The team must comprises of :
(i) Authorized signatory (ii) Project leader (iii) Legal adviser.
Negotiations between the parties are normally confined to the proposal offered by the service provider. One of the members of negotiation team must be present while negotiating as he is aware about all the aspects of and related to the desired agreement. It is always good to minute the meeting so that earlier meetings need not have to be looked into again, even if the team members change due to unavoidable reasons.
5.FINALIZE THE DESIRED SERVICE LEVEL:
Finalizing the service level happens on the basis of the real customer requirements also taking into account the cost requirement
6.FINALIZE THE TOLERANCE LIMITS OF THE SERVICES:
Tolerance limits exhibits the minimum and maximum level of the expected service level in every level in every component of the services. The minimum level shows the lowest expectation of the customer, below which the customer will start losing the revenue or customer trust or both. The maximum service level is the indicator of the upper limit preferable cost.
7.FINALISATION OF OBLIGATIONS:
Every contract contain obligations to be performed by both the parties, SLAS are not in any way exempted from that general rule. Obligations are to be performed by both the parties in the sequence stated in SLA and within the specified time period. The obligations can be classified as:
• Independent obligations • Interdependent obligations • Conditional obligations • Circumstantial obligations.
8.FINALISE REPORTING AND MONITORING SYSTEMS:
There are professional monitoring or report collecting companies in ISP and telecom services etc., otherwise parties can themselves decide the reporting model, responsibility and frequency of reports. The Monitoring authority is to keep reading the reports and monitoring the progress of the agreement and reports to the concerned person accordingly.
9.FINALISE REWARDS AND PENALTIES:
The objective of penalty is not only to compensate the other party due to the loss caused but it is also a means by which both the parties remain cautious of their obligations. As specified earlier in B2C services penalty is self-imposed and under B2B services it has to be laid down under the agreement and hence under this compensation is provided keeping the liquidated damages in the mind.
10.DISPUTE RESOLUTION CLAUSE:
It specifies the process of resolving the disputes, in case of any dispute arises between the parties. Arbitration and litigation must be the last step for resolution of disputes and some other way must be specified in agreement for resolving the disputes amicably. The following steps are recommended:
• Reference to a Joint Committee • Expert Opinion •Mediation • Arbitration
All the important documents mentioned in the SLA must be laid down in the index and should be attached under the annexures.
12.AUTHORISED SIGNATORIES AND COMMUNICATION OFFICERS:
It is essential to specify the authorized signatories and the mode of communication along with the communication points.
It is advisable to insert a termination clause with post termination financial consequences to avoid heavy costs etc.