Service Level Agreements

1
Service Level Agreements
2
Service Levels Defined

• Service Levels are
• Measures of the quality of the services rendered
• Critical for business operations and support
• Incentives for Service Provider to make
  appropriate business decisions
• Training
• Methodology Implementation
• Staffing
• Service Levels reflect current business needs
• Company needs are certain to change
• Service Level Agreement should provide the
  mechanism to allow evolution
• Company should define, not negotiate, its
  priorities

3
Service Level Objective

• Implement Methodology that will be flexible
  enough to
• Adapt service levels to reflect business
  priorities
• Create new service levels
• Add / Delete service levels to reflect business
  evolution
• Continuously improve performance
• Avoid constant negotiations
• Protect Service Provider from unanticipated risk
• Guide Service Provider proactively
• Increase probability of meeting Company desired
  service
• Decrease probability of financial consequences

4
Service Level Building Blocks

• Service Levels
• Critical
• Key
• Attainment Levels
• Minimum
• Expected
• Performance Categories
• Amounts at Risk
• At Risk Amount
• At Risk Pool -- Available for Allocation
• Allocation of At Risk Pool to Performance
  Categories
• Allocation among Critical Service Levels within
  Performance Categories
• Critical Service Level Matrix
• Continuous Improvement
• Earnback
• Ability to add - change - delete

5
Service Level Measurements

• Critical Service Levels
• Critical to the welfare of Company
• Service Level Credits are DUE for Service Level
  Default
• (defined as failure to attain Minimum or repeated
  failure to attain Expected)
• Key Measurements
• Measurements are meaningful to Companys business
• Service Level Credits NOT DUE for failure to
  attain
• May be candidates for Critical Service Levels
• Same format (Expected / Minimum) as Critical
  Service Level

6
Service Levels Minimum and Expected

• Each Critical Service Level has Minimum and
  Expected Service Level,
• e.g., for Percent of Maintenance Programming
  Changes Delivered on Time, on a monthly basis
• Expected 95 shall be complete on schedule
• Minimum 90 shall be complete on schedule
• Expected Service Level
• This is the service Company is purchasing
• A service level default shall be determined to
  occur AFTER the 3rd failure to achieve in a
  rolling 12 month period
• Minimum Service Level
• This is bad service
• Level of performance below which a Service Level
  Default shall be deemed to occur

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Service Levels Performance Categories

• Performance Categories
• Established after brainstorming What is
  important to Company?
• Keeps focus from getting lost
• Logical Grouping of Critical Service Levels
• System Availability
• Applications
• Call Centers
• Other Major System Areas
• Maintenance Support
• Percent of Business Deliverables without Errors
• Percent of Maintenance Programming Changes
  Delivered On Time
• Percent of Cost Overruns
• Staff Support
• Retention of Key Staff
• Percent of Staff Scheduled/Staff Completed

8
Service Levels At Risk Amounts

• At Risk Amount
• Percentage of Total Monthly Charges placed at
  risk by Service Provider
• Tied to attainment of Critical Service Levels
• At Risk Amount is based on total monthly charges
• Not to charges by service category or limited to
  Contracted charges
• Excludes pass-through amounts
• Represents Service Providers maximum exposure
  for Service Level Credits
• Allied month by month not lump sum for whole
  contract
• At Risk Pool Available for Allocation
• Multiplier of the At Risk Amount
• i.e., 150 is 1.5 times the At Risk Amount
• Does not increase Service Providers exposure to
  At Risk Amount cap
• Enables meaningful allocation of the At Risk
  Amount across Performance Categories and, in
  turn, across Critical Service Levels

9
Service Levels Allocations of At Risk Amount

• Allocation of At Risk Pool
• Portion of At Risk Pool allocated to each
  Performance Category
• Total of the Allocations of At Risk Pool cannot
  exceed the At Risk Pool percentage
• Allocation to each Critical Service Level within
  Performance Category
• Percentage of Allocation of At Risk Pool
  associated to each Critical Service Level within
  a Performance Category (percent of a percent)
• Total of the Allocations of the Allocation of At
  Risk Pool cannot exceed 100 for all Critical
  Service Levels within a Performance Categor

10
Service Levels Continuous Improvement and Earnback

• Continuous Improvement
• Company is buying service for now and the future
• Company is entitled to benefits derived from
  technology / competition
• Earnback buying todays service, for now and the
  future
• Review on operational anniversary date
• Review performance on an individual Critical
  Service Level basis
• If the yearly average meets or exceeds the
  Expected Service Level
• any Service Level Default for that Critical
  Service Level is forgiven
• Continuous Improvement and Earnback rights are
  tightly coupled

11
Service Levels Modify Performance Categories

• Company can unilaterally add or delete a
  Performance category by providing notice
• Allocation of At Risk Pool for all Performance
  Categories must be reallocated such that the sum
  of all Allocation of At Risk Pool amounts do not
  exceed the At Risk Pool Available for Allocation
• Company can unilaterally change a Performance
  category Allocation of At Risk Pool by providing
  notice
• Allocation of At Risk Pool for all Performance
  Categories must be reallocated such that the sum
  of all Allocation of At Risk Pool amounts do not
  exceed the At Risk Pool Available for Allocation
• Company cannot unilaterally change the actual
  value of a performance measure

12
Service Levels Modify Service Levels

• The Company can DELETE Critical Service Levels by
  providing notice
• Allocation of Allocation of At Risk Pool for
  deleted Critical Service Level must be
  reallocated to other Critical Service Levels
  within the Performance Category such that they do
  not exceed 100
• The Company can CHANGE the Allocation of
  Allocation of At Risk Pool by providing notice
• Allocation of Allocation of At Risk Pool for
  Critical Service Level must be readjusted for
  other Critical Service Level(s) within the
  Performance Category such that they do not exceed
  100
• The Company can ADD Critical Service Levels by
  providing notice and accumulating adequate
  measurements
• Allocation of Allocation of At Risk Pool for
  Critical Service Levels within the Performance
  Category must be readjusted such that they do not
  exceed 100

13
Service Levels Add Methodology

• Critical Service Level can be added by providing
  notice and accumulating adequate measurements
• Establish Expected and Minimum based on actual
  measurements
• Requires 9 months of measurements
• 9 Month average is Expected
• 9 Month low point is Minimum
• The date Company serves notice to establish,
  establishes that the 9 previous consecutive
  months are to be used
• Alternatively, an industry standard with agreed
  Expected and Minimum levels may be negotiated
• Company can make multiple changes at the same
  time
• Changes can be made once each calendar quarter --
  to take effect in 90 days

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Service Levels Summary

• For the Service Provider
• Establishes maximum At Risk Amount without
  excessive risk
• Fixes the size of the At Risk Pool
• Future adds/changes/deletions controlled by rules
• Earnback allowed
• For the Company
• Meaningful At Risk amount
• At Risk Pool applied broadly enough to allow
  meaningful weight to individual Critical Service
  Levels
• Annual performance reset to ensure Continuous
  Improvement
• Methodology ensures flexibility to adapt with
  minimal negotiations