Room for negotiation
Helen Kist, managing director of Iowatch, said the negotiation of the initial terms of SLAs is key to effective management. "IT managers need to allow themselves room to negotiate on penalties for SLA breaches," she said. "They should take advantage of these provisions and ensure that the penalties provide adequate recompense, relative to the significance of the breach to the business."
Scholtz pointed out that there are three key elements to consider when negotiating an SLA: technical considerations, quality of service and end-user satisfaction. There is a temptation to include only the most easily identifiable metrics, but it is important to find measurements that adequately gauge quality of service and end-user satisfaction.
"We advocate a balanced approach," he said. The danger of relying on technical measures for SLAs is that they are not ultimately a measurement of end-user experience. While an outsourced helpdesk might seem to be providing value for money by its rapid call answering, the measurement becomes irrelevant if the quality of advice to the end-user is poor. A common failing of SLAs is to focus on technological issues  such as processor use  which are not ultimately assessments of service provision.
When setting about establishing an SLA, considerations such as performance and availability of service should be taken into account, along with quality of service issues such as level of help-desk responsiveness and customer satisfaction, Scholtz said.
He added that some service providers are reluctant to include measurements such as customer satisfaction in their agreements because of a perception that people were more likely to complain than to compliment.However, one way around this problem is to agree how satisfaction will be measured. "By measuring satisfaction through monitoring programmes such as biannual surveys, providers can be assured that the results are not skewed," said Scholtz.
Although ISPs tend to make amends for poor service by offering free service provision, Kist revealed that some offenders have offered cash compensation. "We already have an example of a company that got money back from an ISP for persistent SLA breaches," she said.
Automatic monitoring tools are one option for firms wanting to enforce SLAs. Another is to use undercover staff to test the service at end-user level. Some companies farm out this monitoring activity to a third party. Spot checks can involve submitting dummy orders for goods on e-procurement systems or just testing the quality of service provision. "There are companies that do Web site performance monitoring and pretend to buy certain items for hours and hours on end," said Scholtz.
IDC's research demonstrates that senior managers outside the IT department prefer service-level agreements to be measured in a way that shows the impact on the overall business process  rather than traditional IT performance metrics such as response times and uptime. Eighty-two percent of organisations said they would prefer to have SLAs specified in terms of end results for the business process.
"The future will be characterised by specific selective outsourcing," said Scholtz. Meta predicts that during 2001 to 2002, IT vendors will increasingly fix prices according to pre-agreed service levels. "But the trend for wholesale outsourcing is a dying one."
Studies carried out by analyst firm Forrester Research indicate that by 2002, 42 percent of companies will be outsourcing four or more processes, compared with just 26 percent in 2000. Only four percent of firms said they do not expect to use any external help. Clearly, SLAs will be important for the majority of IT managers.
And what better way is there of demonstrating the effectiveness of IT management than receiving cash compensation from under-performing contractors?
