Service Level Agreement (SLA) Boot Camp

Service Level Agreement (SLA) Boot Camp

by: Andy Quick

Service Level Agreements, or กSLAกsก are tricky but useful mechanisms for managing the risk of an ongoing relationship with IT service providers. Unfortunately, most SLAกs that show up in service contracts as worthless, cosmetic paper additions. SLAกs can be extremely powerful tools to help you and your service provider get the most out of a relationship.

What is an SLA?

A service level agreement (SLA), in its most basic form, is a contractual commitment to meet specific goals. If, for example, you sign up for a hosting contract with a provider, you may desire an SLA that measures the uptime of your website. If you outsource your help desk, you may want an SLA that measures the time it takes to answer the phone. Usually, an SLA includes a penalty and/or reward framework. For example, many web hosting companies offer a refund based on the number of hours your website is unavailable. On the flipside, an SLA may include an extra bonus to your help desk provider if all calls are answered within 30 seconds. The following are typical examples of SLAกs:

กAll help desk call will be answered within 90 secondsก

ก95% of all bills will be printed and delivered on timeก

‘the website will be available 99.99%ก

กProject X will be delivered within 2 weeks of the planned scheduleก

What isn’t an SLA?

An SLA is not a way to cut your costs. Rather, SLAกs are mechanisms for managing risks, sharing pain, and benefiting from success. Many SLAกs are setup as กoutsก to contracts that allow customers to penalize technology providers for nonperformance. Although penalties do reduce costs and they do send a strong signal to service providers to improve their service, neither you nor the service provider กwinก if an SLA is missed. Think of an SLA as a shared goal.

SLA Philosophy

The best SLAs are setup to allow both you and your service provider to share in the success and failure of an agreement. If you intend to turn over the operation of your billing system to a service provider, getting the bills out on time is critical. Whether you do it yourself or partner with someone, if you fail to produce invoices, you delay incoming revenue. In this example, your SLA should inspire your vendor to deliver on performance levels that have an actual impact to your business. Letกs say your current billing accuracy is 90%. If you increase this accuracy to 95%, you have directly improved your companyกs bottom line. If you intend to outsource this function, your SLA should include a shared billing accuracy reward to the service provider if they help you improve revenues.

Make It Count

Some web hosting plans offer an uptime measure that, if not met, will result in a refund to you. Unfortunately, this ‘refundก may be calculated as a credit based on the time that your site was down and your monthly hosting fee. For example, if you pay $100 per month for hosting services, and your site is down for 1 hour, your credit may only be 14 cents! $100/720 (number of hours in a month) = $0.14. If, on average, you sell $50 worth of goods through your website each hour, 14 cents isn’t much of a blow to your hosting company. I recognize that my example is slightly exaggerated. Many hosting companies offer a more material penalty and most web sites do not generate $50 in sales per hour. But you can see how this penalty and SLA is misaligned with the business model. If you know you make $50 per hour in sales through your website, your hosting company should incur a much greater penalty for not keeping your website up and running! Whether you negotiate an SLA with a hosting company or a large IT company, create an SLA that is specific to your business and truly establishes risk sharing (i.e. we กwinก or กlooseก together).

Devil In The Details

A good SLA has four critical components: description, target, measurement, and penalty/reward. If you have an SLA that is missing one of these components, you run the risk of losing the benefit of having the SLA to begin with. In the web hosting example above, the SLA sounds good, but the actual measurement and penalty weigh heavily in the favor of the hosting company (they have little to loose!) Make sure your SLAกs are well defined and agreed upon before you ink the deal. Hereกs an example of a good SLA:

Description: Billing All bills will be rendered, printed, and mailed on a timely basis to ensure unbilled revenue is minimized.

Target: 90%

Measurement: Ratio of number of planned bills / number of bills actually produced. The calculation is based on the number of records in the billing input file compared against the billing output log file which lists the bills actually rendered.

Reward/Penalty: If billing accuracy is below 90%, penalty is calculated as 1% of the unbilled revenue for that billing run. If billing accuracy is above 90%, a bonus is calculated as 1% of the additional revenue billed.

In this SLA example, your service provider stands to loose or gain substantially based on their performance. Similarly, your company stands to loose or gain substantially based on the performance of the service provider. Depending upon your daily billings, 1% could be significant. Note the specificity of the SLA measurement and calculation in my example. If you are not very specific with the calculation methods, actual performance against service levels are open for debate.

Negotiate Up Front

Many businesses strike deals with IT companies and leave SLAกs as an open item. Many IT service providers will want to establish a กbase lineก period where SLAกs are measured and then negotiated. In many cases, this request is reasonable, especially if an IT company has little to no understanding of your environment and your current performance record. However, if you wait to negotiate service levels until after you ink a deal, you loose tremendous leverage with your provider unless you really think you can walk away from the deal. Ideally, choose a provider that is willing to negotiate a service level up front. In my experience, these SLA negotiations are much more difficult on the backend.

Raise the Bar

A service level agreement should be changed periodically. Letกs look back at my billing SLA example. Letกs assume that after 1 year of service, your provider is billing at an accuracy, on average, of 95%, and in turn, you are rewarding them consistently for beating the original service level. Itกs time to raise the bar! If your provider can increase your accuracy from 90% to 95%, maybe they can increase your accuracy from 95% to 99%. Raise the SLA bar (target) to 95%, and only reward them if they beat this new level of quality. By providing the right incentives to improve upon service levels, both you and your service provider can benefit.

The Shorter, The Better

I have seen service contracts with dozens and dozens of SLAกs. If you establish multiple SLAกs, you and your service provider will have broad visibility into performance levels. However, establishing many SLAกs can water down the overarching performance of a service provider. Put simply, a service provider can กmakeupก poor performance on one SLA by beating the performance target of another SLA. To keep things simple, pick the few critical success factors of your business and establish applicable service levels that your provider can truly focus on.

Service Level Agreements should be established as a กdashboardก for you and your service provider to share in the success and failure of your arrangement. SLAกs are less effective if they are established as contract กoutsก or as penalty frameworks, because they fail to drive a partnering relationship. Negotiate SLAกs which, if met or beaten, truly benefit your company and your service provider. Always define SLAกs to the lowest level of detail possible before you finalize the arrangement since negotiations become even more difficult after the deal is executed. And never commit to an SLA that could hurt you but not your provider.

About The Author

Andy Quick is cofounder of Findmyhosting.com (http://www.findmyhosting.com), a free web hosting directory offering businesses and consumers a hassle free way to find the right hosting plan for their needs. Feel free to contact Andy at [email protected] in case you have any questions or comments regarding this article.

This article was posted on May 15, 2002

by Andy Quick

Billing Woes For Telcos

Billing Woes For Telcos

by: Arun Tibrewal

The rapid rise in the telecom industry over the last few years has been an event cheered by many. Today, Indian market is the second largest growing market in the world. And considering the vastly increasing population coupled with increasing economic prosperity, the telecom companies have nothing to fret about. Yet, there are certain chains that are shackling the growth in the telecom. While many companies have paid due emphasis to coverage technology, installing expensive equipment all across for better coverage, they are yet to pay proper attention to their backend, mostly importantly the billing systems.

Quite many telecom companies still have in place archaic billing systems, these software applications were bought offtheshelf and are complex beyond imagination. Not are they slow on processing or what is better known as ‘turn aroundก time, but are also not scalable to the everchanging needs of the company. Hence, there are still a lot of services (related to billing) that many operators are unable to provide.

In such a scenario, Swastik Infotech Pte Ltd. has launched one of the most revolutionary telecom billing system in the marketplace. Christened as eBiller, this system promises to put an end to all the discrepancies that arise out of the traditional billing systems. The biggest breakthrough of eBiller over other such systems is the ease that it offers to the companies to plug in new services without any hassles.

This innovative billing system has been designed keeping in mind the present needs and the future requirements of the telecom companies. It is scalable and can be easily configured to suit the changing requirements. It is also easily compatible with latest technologies like ASP.Net (Active server pages) and works efficiently in Dot Net platform.

eBiller is a robust system that has been rigorously tested for any sort of inconsistencies. It also comes from the stables of Swastik Infotech, a company having an enviable track record in the marketplace.

About The Author

Arun Tibrewal is an online marketing promotions specialist since 1998 and owner of www.iwayhost.net and its network sites. Iwayhost is dedicated to provide top class hosting services with there straight forward plans. Permission is granted to reprint this article as long as the resource box should keep intact with the following links.

http://www.iwayhost.net

http://www.onlydevelopers.com

http://www.siplnet.com

[email protected]

This article was posted on February 24

by Arun Tibrewal

How to Boost Conversion Rates, While Lowering Merc

How to Boost Conversion Rates, While Lowering Merchant Account Fees!

by: Eric Graham

Using an Address Verification System (AVS) when processing your online credit card transactions can help to reduce the number of fraudulent transactions you receive. However, most online merchants don’t know that using AVS can also reduce your number of legitimate orders.

Using AVS can hurt your conversion rates in two main ways.

1. If you set your AVS rules to reject all transactions that do not match both street address and zip code, you may be loosing legitimate sales from customers who do not understand that the billing address needs to match the address that their credit card statement is mailed to.

2. The more troublesome problem with AVS occurs when your customer has recently moved. Even if you update your billing address with your credit card company after you move, it can take up to 6 months or longer for them to update the AVS database with your new information (even though they make sure that the bill arrives at the right address!)

The worst part about this delay is that often customers will blame the merchant if their card gets rejected for this reason. If their credit card bill arrives at the right address, they assume that their credit card company updated their information. When a card that they know should work gets rejected by your website, they often become angry with you, not their card provider!

This happened to me recently. I moved my family into a larger home over eight months ago and the debit card that I use for most of my online purchases still gets rejected unless I use my old billing address, even though the bank statement has come to our new address from day one!

The solution to the first problem is quite easy. Simply make sure that you use a statement near your ขBilling Addressข fields telling your customers something along the lines of, ขTo speed processing of your order, please ensure your billing address matches the address on your credit card statement.ข

Include this type of statement near your ขBilling Addressข fields and your AVS matches will improve.

In markets with historically low attempted fraud rates, you can also try loosening your AVS rules a bit. Most AVS systems check both the number in the street address and the zip code. By setting your AVS rules to accept transactions that match for only one of the two AVS numbers, but still rejecting transactions that do not match for both, you can improve the number of successful transactions. If you attempted fraud rate is very low you can even try accepting transactions that fail both AVS checks, but flag the transactions for additional follow up before shipping.

Before loosening your AVS rules, you need to understand that most merchant account providers classify transactions that do not match for both street address and zip code as ขnonqualifiedข transactions. These transactions usually get charged a higher discount rate than your normal discount rate. Depending on you merchant account agreement this penalty can add up to an additional 2% above your normal discount rate, so check with your merchant account provider before accepting ขno matchข transactions.

The solution to the second problem take a little bit more work to implement, however it can significantly reduce the number of AVS mismatches you receive. For this solution you can keep your AVS system set to reject ขno matchข transactions, however you need to modify your ขCard Rejectedข error page to include a brief educational statement, such as the one below.

ขWe’re sorry, your credit card has been declined. This can happen for several reasons. Your billing address* should match the address on your credit card statement. Please check your billing address, card number and expiration date and try again.

*NOTE: If you have recently moved, your credit card company may not have updated your billing address in their Address Verification Database. It can take up to 6 months or longer for some credit card companies to update your address, even if they send your bill to your new address. If you have recently moved, try using your previous billing address when you check out.ข

By making just a few changes in the way you use AVS at your web site and by educating your customers about address verification, you can boost your conversion rates and sales, while lowering your merchant account fees!

Copyright 2004 Eric Graham

About The Author

Eric Graham is the owner and CEO of several successful online and offline businesses. Recognized as one of the top authorities on eCommerce and Internet Marketing, Eric is a sought after speaker and consultant. To boost YOUR conversion rates and gain an unfair advantage over your competition visit www.websiteevaluations.com.

This article was posted on April 02, 2004

by Eric Graham