SLAs, While Necessary, Can Have Evil Results

Ann All

"You can't manage what you can't measure," like many cliches, got to be a cliche in the first place because of the inherent truth in the statement.


This particular cliche goes a long way toward explaining the popularity of the service-level agreement, or SLA, in managing relationships with outsourcing providers.


Yet as much sense as this seems to make, companies have a tendency to rely too heavily on SLAs and to use them as a substitute for other tried-and-true management techniques, such as communicating early and often with providers.


The potential for unintended consequences with SLAs also looms large. For instance, customer service representatives working under an SLA that places strict time restrictions on help-desk calls could end up being too abrupt with customers.


"Massive" SLAs drive up outsourcing complexity and costs, says the head of IT Advisory for KPMG -- and resentment on one or both sides of an outsourcing relationship, we'd add.


KPMG recently released a survey in which 60 percent of respondents said outsourcing problems were related to people. These problems, not surprisingly, often emanate from poor relationship management, says the KPMG exec.


In an interview with IT Business Edge, the CTO of managed hosting provider Rackspace says that while SLAs are still a necessary tool, "they really shouldn't be." He likens SLAs to a pre-nuptial agreement -- used only "if something goes terribly wrong and emotions begin to cloud everyone's judgment."


That said, he recommends establishing appropriate service-level targets -- a process that can be tricky, especially in new outsourcing relationships -- and making sure SLAs are written in English rather than legal-ese so that both parties understand the agreement.

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Add Comment      Leave a comment on this blog post
Feb 18, 2007 12:15 PM Tom Schaefer Tom Schaefer  says:
This is true when SLA's are viewed purely as contract terms that legal staff, procurements teams, and others not actually involved (nor accountable) in the operational effectiveness after the agreement is signed.   These pre-agreement teams are worried about protection, not in operational collaboration that is adaptive and guides effective service relationships after an agreement is signed.    Technology can help transform the obligations that are in these agreements into a "Dynamic Digital Agreement" and foster collaboration through web-based dashboards and process automation like proactive alerting.  This is important for two reasons: 1) the operational teams (at service provider and service customer) then have a shared understanding of obligations; and 2)they can modify this shared understanding together based on new insights about what is important to deliver success for both parties over the life of an agreement.  Digital Fuel's ServiceFlow is one example http://www.digitalfuel.com/products/sla-management.aspx of such technology that Service Providers and their customers use to eliminate unintended negative consequences from SLAs and adapt to what is important in the spirit of the Service Relationship to drive business value for both parties. Reply
Feb 19, 2007 9:45 AM Robin F. Goldsmith, JD Robin F. Goldsmith, JD  says:
The issue shouldn't be whether or not to use an SLA, or to use it only after the damage has been done, by which time of course it's too late. SLAs are one of several parts of a competent contracting process that most buyers don't know to do or how to do it. It starts with the buyer discovering their REAL, business requirements.Then, people need to learn how to write contracts and SLAs that actually address the real performance factors of all stripes that are truly important. In general, buyers don't know how to do it; and neither do sellers, but they have a vested interest in keeping the SLA variables in terms of their activities, as opposed to their results. Reply

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