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SLAs – hammer or helper?

Jan 28, 20043 mins
Data Center

* Focus in SLAs should not be on punishment

Earlier in my career, I created and negotiated service-level agreements on both sides. As an application service provider, I negotiated SLAs with my customers, and on the other hand I put SLAs in place with my service providers. In general, the negotiations seemed to revolve around vague wording to avoid blame or responsibility in the event of a service outage.

For example, many businesses have negotiated an SLA for Internet access. The buyer wants it all: cheap Internet access with high bandwidth availability. Often, they also want the service provider to be penalized whenever service levels drop below those promised. Meanwhile, the provider is fighting for business and will often agree to unreasonable demands to win the deal, hoping that nothing will go wrong – or, if something does, to secure forgiveness and retain the business.

Do your SLA efforts turn into contentious contract negotiations? This approach to SLAs is doomed from the start because it completely overlooks the value that SLAs give both the provider and the consumer of a service. At their best, SLAs clearly document the relationship, understandings, and expectations that already exist between the provider and the customer.

In an ideal world, service providers constantly evolve to meet the consumers’ needs, while consumers communicate their needs and are willing to pay appropriately to address them. To reach its objectives, an organization requires certain services at specific performance levels, at an affordable price. To provide services that meet customers’ needs, providers need to first understand their customers’ expectations, and then ensure that the necessary resources are available.

The two organizations need to communicate clearly, completely, and consistently to develop a clear understanding of needs, costs, and approaches. Once done, that easily translates into the formal SLA. Open dialog allows for resolving misunderstandings, considering alternatives, and understanding the implications of various options. This results in the parties understanding how to best work with and help one another to achieve their collective goals.

SLAs developed in this way are rare. Instead, SLAs are often used as hammers. Such SLAs are fun for neither party, nor are they effective in achieving the required levels of service.

However, SLAs that clearly articulate expectations between the two parties can be quite helpful. As requirements change, the SLA shows that those changes haven’t been communicated or negotiated. When the provider exceeds expectations, the SLA demonstrates both the fact and the quantification of the provider’s superior service. Of course, when there is a breach of the SLA that is also clear, as are the remedies provided (which we will discuss in a future article).

Ideally, an SLA simply captures, in writing, the existing relationship and expectations between the service provider and its customer. It does not define a relationship; it communicates it. An SLA provides clarity for those not present during the provider-customer conversations, clearly addressing questions about the service and relationships that may arise, and goals for the growth of the relationship between the parties. Once this is clear, both the provider and consumer can monitor and manage the service, its costs, and its value. Understanding the linkage between the service and business objectives then becomes the primary focus.

How do you approach SLAs with your providers or customers? E-mail me at