The Right Way to Set SLAs

Before rushing to establish a Service Level Agreement, IT managers first must step back and view them in the larger context of Service Level Management.
When we consult on IT Service Management [1], everyone wants to jump into Service Level Management and set their Service Level Agreements (SLAs) right away.

While the SLAs get a lot of press, they are part of the Service Level Management (SLM) process and we need to step back and discuss how SLAs should be arrived at.

The goal of SLM is to understand the requirements of the customer and organization, factor in the capabilities of the supplier(s) and then deliver quality services that meet those requirements and are subject to constant improvement. The intent of this is to build a better relationship between IT and its customers[2].

It is important to have a solid SLM process as it will affect the overall IT Service Management (ITSM) initiative. In fact, if your operations environment is not stable, you should start with Change and Configuration Management first as setting SLAs that can cause everyone to lose confidence in the ITSM effort.

To start the journey, IT must designate a Service Level Manager[3] who is empowered to negotiate with the customers and make commitments that are binding on the IT organization. This person must be very knowledgeable about IT and the business and be an excellent communicator with honed negotiation skills.

The Service Level Manager meets with each customer and understands requirements. The manager then crafts a Service Level Requirements (SLR) document that identifies in business terms what the customer needs.

Next, the SLM manager meets with the suppliers who provision the services that the customer is interested in. These suppliers could be internal, external or a mixture thereof. These suppliers need to review each service and craft Service Specification Sheets for each. If the SLR is a customer-facing document, then the spec sheets can be viewed as the technical underpinning documents outlining how the business requirements will be met.

Metrics Must Mean Something to Customers

Now, derived from the customer's requirements set forth in the SLR and the supplier inputs in the spec sheets, the manager crafts a Service Quality Plan (SQP) that puts forth key performance indicator metrics and any critical success factors for monitoring the performance of the service. It is important that the metrics have value to the customer and IT, not just IT.

When communicating with the customer and ensuring requirements are met, it is very important to be measuring what matters. For example, what value does availability as a percent really serve if the business lost a painful $2 million during an outage that occurred during the 0.001% of unplanned downtime?

At this point, the manager needs to negotiate the agreements relating to provisioning. The Service Catalog documenting what IT can provision must be developed or refined if it already exists. The Service Level Agreements (SLAs) stating what IT and the customer will each provide and how the relationship will be managed must be crafted. The Operational Level Agreements (OLAs) stating how IT will meet the service levels that are needed and the Underpinning Contracts (UCs) committing vendors must be set as well.

To be clear, the OLAs are used with internal groups to ensure they can provide service levels that enable IT to meet the customer's defined Service Levels. UCs are used with vendors/third parties to ensure they can meet defined Service Levels.

The creation of these agreements will require repeated sessions of negotiation, creation of drafts, amendments and reaching a final conclusion for each that commits the involved parties. This level of negotiation is why the Service Level Manager must be skilled in both communications and negotiations plus have a solid understanding of the IT organization and the business.

When creating the aforementioned agreements, always think about how objectives and service levels can be crafted such that they are "SMART" meaning they must be specific, measurable, attainable, realistic and timely. One reason for these attributes is that once the agreements are set performance must be measured using the critical success factors and key performance indicators set forth in the SQP.

It's About the Relationship

Lastly, one comment on SLAs - keep them simple. An SLA is not a contract - it is a formal expression of a relationship. If a SLA is so complicated that nobody can understand it and therefore gets confused as to what to do when and how then the results can actually be counterproductive and harm both service levels and the relationship with the customer. IT exists for the customer - not the other way around and some careful give-and-take may be needed.

On an ongoing basis, for example monthly or quarterly, the Service Level Manager should sit down with the various customers to review the performance of IT relative to the services provisioned for each customer.

In areas where corrective action is needed, a Service Improvement Plan (SIP) should be launched and one of the outcomes may be to revise the previously defined service levels. These Service Review meetings are a great opportunity to not only discuss performance but also the direction of the customer and IT. Whenever there is a customer contact point, that opportunity should be used to understand what is going on with the customer and to update the customer about what is going on in IT.

The idea is to build the relationship constantly. If the relationship is lost, then all of the service level documentation is pretty much pointless.

The most important things coming from SLM are not voluminous agreements that sit on a shelf. In other words, the goal is not to simply create documentation. Instead, the true benefits lie in understanding the needs of the customer, measuring IT’s performance against those requirements and then continuously seeking methods to improve the provisioned service levels. In this manner, IT can deliver quality services to the organization that enables organizational goals to be met.


Glossary of Terms: ITIL has a specialized vocabulary. For reference, please see the OGC’s glossary.

[1] The IT Infrastructure Library (ITIL) is about establishing an IT Service Management culture focused on meeting the needs of the Customer and the business. For the purpose of this article, we are focusing on ITSM, as it is the overall process that SLM sits within.

[2] In ITIL, “Customers” specifically refer to the owners of services who typically has the budgetary responsibility for them and defines their requirements. Users, on the other hand, are the consumers of the services. In this respect, ITIL allows for the two groups to be different. For example, a VP of Sales may be the customer but the field sales team with the PCs using the CRM package would be considered the users of the CRM service.

[3] Please understand that ITIL defines roles, not organization. The Service Level Manager role is what someone must perform – it does not have to be a unique position on the organizational chart. For example, in smaller organizations, the head of IT may be the Service Level Manager. In larger teams, this may well be a titled position reporting to the CIO.

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