The Foundation of Successful IT Service Delivery: Service Level Agreement
Service Level Agreements (SLAs) are the backbone of any cloud managed services engagement. They provide a clear understanding of service expectations, enable performance measurement, and serve as a foundation for service delivery improvement. However, poorly designed SLAs can lead to unnecessary costs, decreased user satisfaction, and increased complexity.
Defining SLA Priorities: Impact, Urgency, and Business Needs
A CIO would zero down on the required service level agreements based on a matrix of Impact and Urgency. Usually SLAs span across 4 priorities (e.g. P1 to P4 or Sev 1 to Sev 4). The priority definitions are standardized across industry with minor nuances across various industries and customers. However, the actual SLA response time for each priority may differ from customer to customer based on the business requirements, end customer expectations, business impact and underlying revenue loss due to outage, dependency across multiple suppliers in a multi-supplier landscape and other factors.
The Supplier's Perspective: Why SLAs Matter
For a supplier, SLAs are an important pricing consideration due to the following reasons:
1. Ticket distribution across each ticket priority and the SLA/SLO/SLI requested
2. Staff coverage needed to adhere to the SLAs impacts the headcount
3. Onsite presence needed for critical issues impacts the offshoring ratio
4. Financial penalty associated with the SLAs need to be accommodated in case of any anticipated failures
The "No SLA" Scenario: A Risky Proposition
In a scenario, where there are no SLAs and tickets need to be resolved on a best effort basis, there would be minimum staffing coverage needed just based on skillsets and even 100% offshoring maybe possible. However, this is not practical as IT is expected to provide a certain service reliability to business and business in turn to their end customers to minimize the impact on business revenues.
Guiding Principles for Right-Sizing Your SLAs: A Strategic Approach
Optimizing service level agreements requires a strategic approach. Here are some SLA best practices:
1. Prioritize the Critical Few: Focus on high-impact applications that are crucial for business operations. Regularly reassess application criticality to ensure SLAs align with evolving business needs.
2. Embrace the "Best Effort" Approach: Consider a "best effort" category (e.g., P5/Sev 5) for less critical applications or define a relaxed SLA for such applications. This can significantly reduce support costs while maintaining acceptable service levels for these applications.
3. Leverage Application Portfolio Management: Utilize frameworks like Gartner's TIME quadrant to categorize applications (i.e., across gold, silver, bronze categories):
a. Eliminate: Applications with low business value can have minimal or "best effort" SLAs.
b. Tolerate: Relaxed SLAs for applications with limited impact on core business functions.
c. Migrate: Prioritize migration for applications with low technical fit and consider relaxed SLAs during the transition.
d. Invest: Focus on high-impact applications with the highest SLA levels to ensure maximum reliability and customer experience.
Designing the Right SLAs: A Collaborative Approach
Instead of simply prescribing SLAs to your service providers, consider these proactive approaches:
1. Incentivize Proactive Incident Prevention: Instead of solely focusing on meeting SLA targets, incentivize suppliers to minimize the occurrence of high-impact P1/P2 incidents.
2. Seek Supplier Expertise: Request input from your service providers on current SLAs and collaboratively design solutions that align with both your business needs and their operational capabilities.
3. Prioritize Applications Strategically: Categorize applications based on their criticality (e.g., Gold, Silver, Bronze) and tailor SLAs accordingly. A regular review of the categorization and associated SLAs may be needed as well to adopt evolving business requirements
4. Explore Cost-Effective Options: Ask suppliers to provide a range of SLA options with associated pricing to facilitate a cost-benefit analysis.
5. Empower End-Users: Encourage suppliers to suggest tickets that can be handled on a "best effort" basis (e.g., P5) and implement internal change management initiatives to manage end-user expectations effectively.
6. Balancing User Experience and Cost: Understand the trade-offs between user experience and cost optimization. Explore options like automation and self-service tools to compensate for potential SLA downgrades while maintaining acceptable service levels.
By adopting this collaborative approach, you can ensure that your IT service delivery is not only effective but also cost-efficient and aligned with your overall business objectives.
Finding the Right Balance: Achieving Optimal Service Delivery
The choice of SLA is a delicate balance between business requirements, outsourcing costs, and user experience. A careful analysis of application landscape, past ticket data, user behavior, and collaboration with your supplier on designing the right SLAs can provide significant cost optimization, improved landscape stability, and higher automation and self-service options.
By implementing these strategies, organizations can optimize their IT service delivery, reduce costs, and build stronger, more resilient business operations.
About Mastek
Mastek has been helping businesses optimize their service level agreements (SLAs) for over 40 years. We work with clients around the world to analyze their current agreements and identify opportunities to reduce costs and improve user experience.
Our approach is to provide objective recommendations based on your specific needs, so you can create SLAs that are truly aligned with your business goals.
