SERVICE LEVEL AGREEMENTS

Whenever a purchase is made, companies or individuals have expectations regarding the performance of the purchased good or service. Ideally, every purchase works 100 percent of the time that the user expects it too, but such service is rarely achieved. For most purchases, having the item in a nonworking condition is inconvenient, but not threatening to the long-term success of a company. A copier that breaks down can cause distress, for example, but is not likely to lead to customers seeking alternative vendors. Such is not the case with information technology services. As such services have become more complex and integral to a company's operations, they have become more critical to the company's survival. Whether IT services are provided by an in-house IT department or outsourced to a service provider, downtime in the IT area of a company can be devastating to a company's long-term survival. Yet the tradeoff of cost and reliability can be significant, so it is necessary for companies to determine what constitutes acceptable levels of service, and which levels are unacceptable. This has led to the development of the service level agreement, which details the acceptable levels of performance, remedies if those levels are not achieved, and can even outline how the transition from one service provider to another will take place. This research examines the service level agreement, including the factors that result in a successful

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es, but this can be a contentious process when it is not viewed as part of the larger business relationship. THE SERVICE LEVEL AGREEMENT AS PART OF THE NEGOTIATING PROCESS The service level agreement codifies the expectations and remedies available to both parties participating in the outsourcing arrangement. In the case of an internal service provider, the service level agreement helps the IT department set its priorities and enables it--and others--to determine whether the IT function is best provided by an in-house staff or through the outsourcing process. Negotiating the service level agreement should take place during the negotiation of the overall contract. If the buyer has stringent expectations, the supplier may want to price the service accordingly in order to be able to meet those expectations profitably. Failing to do this not only can cause resentment down the road, but can lead to the supplier being unable to meet the service levels specified. This results in lost productivity for the customer, and in possibly severe financial problems for the supplier. At the same time, the service levels that are determined as part of the negotiating process may bring to light details in the hardware or software provided by th

Category: Business - S