1. Service Level Agreements
An Overview
April 1, 2008
© Huron Consulting Services LLC. All rights reserved.

2. Service Level Agreement (SLA) – Definition
An SLA is an agreement or arrangement between Service Centers (SC) and their customer base/key stakeholders which defines a service or set of services that a service provider will supply to the service users at a defined service level. The SLA may:
Identify the service commitments of both the SC and the customer base in an effort to define responsibilities and boundaries
Detail the metrics by which performance will be evaluated
Establish processes to track performance levels
Define teams responsible for reviewing metrics, resolving problems and modifying goals over time as technology and business requirements change

3. Service Level Agreement – Purpose
The purpose of an SLA is to:
Agree to expectations with customers
Formulate the commitment of the SC to it’s customers
Ensure an overall understanding of predetermined priorities
Define requirements for successful achievement of customer satisfaction
Define the contact point in the SC for feedback and issue resolution
Define a performance measurement methodology
Establish, clarify and confirm customer expectations of the SC
Create a partnership between the customer and the SC as well as between each SC

4. Service Level Agreement – Characteristics
Effective SLAs are:
Proactively created
Centered around business objectives
Simplified and focused
Balanced performance metrics
Managed by predetermined metrics
Well defined baselines
SLAs are meant to clearly communicate the goals and objectives of the partnership between the SC and the customer.

5. SLA Components – General
Section
Description
Introduction
Name, version, date, purpose of document and contents scope
Service Scope
Who, what, where, when
Service Performance
Basis for service measures and levels which include availability, reliability and response time based on user requirements
Constraints
The boundary within which the service level is based
Price/Fee Structure
Cost or charge to the customer for use of services
Service Management
Scheduled meetings, escalation procedures as well as potential liabilities on the part of the service provider and the customer for non-compliance

6. SLA Components – Service Performance
Subsection
Description
Availability
The scheduled timeframe when service is available to the users
Reliability
The frequency with which the scheduled service is permitted to fail (i.e. the maximum number of failures allowed within a defined scope)
Down Time
In event of a service failure, the period of time it takes the provider to restore service
Cycle Time
The time between requesting or initiating a service and a usable result received by the user
User Satisfaction
The users’ perception of performance received relative to expectation
Performance Metrics
Defined metrics to evaluate the SLA performance factors and the tracking activities that will be adopted
Reporting
The content and frequency of reporting of performance statistics/levels. Distribution of reports - who, how and when
Improvements
The service areas where continuous improvement initiatives will be focused based on the SC’s strategic direction and customer requirements
Account Responsibility
The specific identification of which transactions and accounts will be managed and maintained by the SC 52

7. SLA Components – Constraints
Subsection
Description
Workload
The level of demand or activity beyond which defined performance cannot be guaranteed
Conformance Requirements
The rules and regulations within which the service will be delivered (company policies, regulatory requirements, etc.)
Dependencies
Requirements placed on the user by the SC which if not fulfilled results in the SC not achieving the service level commitment (e.g., customer processing requirements, quality of incoming documents for processing) 53

8. SLA Components – Service Management
Subsection
Description
Disaster Recovery
Policies and responsibilities of how data and information will be restored in the event of a physical disaster. This establishes back-up procedures the SC will maintain in order to mitigate loss of data and information
Escalation Procedures
The mechanism on how to elevate problems or disputes on how services provided by the SC are resolved. This procedure also deals with how the SC will manage problems with the customer or customer representatives
Scheduled Meetings
The establishment of formal performance evaluation and status updates between the SC actual service results versus user requirements. This meeting also provides a format for users to discuss new requirements and establish new plans in conjunction with the SC
Confidentiality Agreements
Conditions under which types of information can be released to external parties and the amount of access vendors and external customers have to internal systems and data
Contact Information
The establishment of resources for maintaining the relationship between the SC and the customer
Understanding expectations is a key component of SLA development. Expectation management is a key component of service management. The expectations cycle: understand - measure – communicate - change. 53

9. Basic guidelines for creating SLAs
Dos
Don’ts
Create a partnership
Use SLAs as a stick to beat the participants
Focus on key priorities
Have too many agreements
Focus on inputs and outputs
Detail processes
Balance requirements with cost effectiveness
Provide service in isolation from cost
Position SLAs as part of an overall customer focus including:
training
customer advisory groups
customer surveys
Center in an “ivory-tower”
Involve the service teams in creating, owning and publicizing the SLAs and their performance against them
Document as “Shelfware”
Discuss, review and update the SLAs regularly to accept business changes
Let SLAs become out-of-date and irrelevant

10. Basic guidelines for creating SLAs (continued)
Define the baseline and compare to benchmarks:
Baseline
Existing service levels and current costs form the baseline and are key to measuring future performance and customer satisfaction:
Determine the number and type of services performed
Determine current service levels (hours of operation, response times, etc)
Assess the cost of providing services to customers
Understand and measure the existing customer service satisfaction levels
Determine the volume of activity serviced
Benchmark operations
Against similar institutions or third party service providers
Against the institution’s own goals and objectives
Be careful to benchmark “apples to apples”
It is impossible to know how to get where you want to be unless you know where you already are. Therefore, SLA baselines must begin with the services as they are today.

11. Basic guidelines for creating SLAs (continued)
Establish performance metrics and design reward systems:
Performance Management
Create a ‘balanced’ view from multiple perspectives relevant to both the SC and customers
Customer satisfaction
Quality of service
Technical performance
SLA performance must be reviewed and monitored by the SC management
Metrics should describe the desired results rather than the efforts required and must reflect reasonable customer expectations
Metrics must be tracked and reported regularly and consistently, always checking for alignment with business objectives
Focus on “a few good metrics” which customers can understand
Keep in mind that metrics affect behavior and build in metrics that encourage “good behavior” and penalizes “bad behavior”
Team and individual incentives should be developed to achieve/exceed the performance targets within the SLAs
Targets must be attainable and reasonable

12. Basic guidelines for creating SLAs (continued)
Establish consistent reporting mechanisms:
Reporting
Track and evaluate metrics every month. Include the SC staff and customer representatives to review and discuss results
Hold executive reviews quarterly to discuss strategic implications of actual performance
Need to increase or decrease service levels
Long-term changes in business needs
Requirement for new services or different service levels
Define people who receive regular reports, attend executive reviews and also those who manage customer relations
Post results over the Web
Distribute results to customers to demonstrate improvement
Setting, tracking and reporting performance goals is the only way to achieve continuous service level improvement

13. Sample SLA Table of Contents
Introduction
Service Scope
Service Performance
Availability
Reliability
Down Time
Cycle Time
User Satisfaction
Performance Metrics
Reporting
Improvements
Account Responsibilities
Constraints
Workload
Conformance Requirements
Dependencies
Price/Fee Structure
Service Management
Disaster Recovery
Escalation Procedures
Scheduled Meetings
Confidentiality Agreements
Contact Information