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Complete Guide to IT Service Level Agreements: Aligning IT Service to Business Needs

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Covering all aspects of Information Technology Service Level Agreements (SLAs), this essential manual is your step-by-step guide to designing, negotiating and implementing Service Level Agreements into your organization.

It reviews the disadvantages and advantages, gives clear guidance on what types are appropriate, how to set up SLAs and to control them. An invaluable aid to IT managers, data center managers, computer services, systems and operations managers.

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Description

Most suppliers lose around 16% of their customers each year. The reason? Poor service – whether perceived or real. Any technology-based support service, whether in-house, contracted or outsourced, stands to be accused of being insensitive to the requirements of its customers (or users). Equally, customers of a support service may have unrealistic expectations of what can be reasonably provided. Service Level Agreements (SLAs) can overcome these gulfs. A Service Level Agreement can create harmony between parties and can prevent disputes between customers and suppliers. It can justify investment and identify the “right” quality of service. It can mean the difference between business success and failure. SLAs are potentially a strategic tool to align all support services (particularly IT) directly to business mission achievement. In the past, few organizations used them in this way.

Armed with this book, more and more businesses are now succeeding.

Where are Service Level Agreements going? Increasingly business-focused. Increasingly measured in real-time. Simple documents that cover complex service infrastructures. Providing a competitive edge. Embracing penalties. The brave, who commit to tight SLAs and perform against them will win the commercial spoils. This book provides the knowledge and tools based on fifteen years of intensive development to ensure your enterprise is among the winners.

A Rothstein Publishing Classic Title. 2002, 278 pages.

ACKNOWLEDGEMENTS…………………………………………………………………………………… iv

FOREWORD……………………………………………………………………………………………………….. xi

PREFACE TO THE THIRD EDITION………………………………………………………………. xiii

1 AN OVERVIEW OF SERVICE LEVEL AGREEMENTS: WHAT THEY CAN

AND CANNOT DO……………………………………………………………………………………………… 1

1.1       Introduction                                                                                                                          1

1.2       Service Level Agreements: Definition                                                                                 5

1.3       Serving the Business                                                                                                            9

1.4       Availability                                                                                                                        11

1.5       Performance: Speed, Response and  Accuracy                                                                  14

1.6       Security                                                                                                                              15

1.7       Quality                                                                                                                                15

1.8       Service Culture                                                                                                                   16

1.9       But Why SLAs?                                                                                                                 17

CHECKLIST #1.1: Service Orientation                                                                                        19

2  THE MEASUREMENT OF SERVICE AVAILABILITY AND QUALITY:

KEY METRICS AND TECHNIQUES………………………………………………………………… 25

2.1       Availability: Optimizing Uptime                                                                                      25

2.2       Change Management                                                                                                         27

2.3       Problem Management                                                                                                        29

2.4       Critical Component Failure Analysis                                                                                 29

Table 2.1: Critical Component Analysis – Cumulative Availability………………………… 32

Table 2.2: Contacts for Monte Carlo Analysis Tools……………………………………………. 33

2.5       Relationship with Security and  Contingency Planning                                                   34

2.6       Scope of Service                                                                                                                36

2.7       Service Products                                                                                                                 37

2.8       Service Hours                                                                                                                     39

2.9          Real Time Interactive Services                                                                                       40

2.10     Batch Services                                                                                                                    41

2.11     Output Arrangements                                                                                                         41

2.12     Telecommunication and Network Services                                                                       42

2.13     Outsourcing                                                                                                                       45

2.14     Applications Development Services                                                                                  50

2.15     Distributed Processing                                                                                                       50

2.16     Help Desk and Technical Support                                                                                     51

2.17     Internet and Intranet Based Services                                                                                  51

2.18     Security Services                                                                                                                53

2.19     Special Requirements                                                                                                         53

2.20     Personal Computing                                                                                                           54

  1. 21 Customer Self Computing 55

2.22     Training                                                                                                                              55

3 HOW SERVICE LEVEL AGREEMENTS APPLY IN AN APPLICATIONS DEVELOPMENT ENVIRONMENT………………………………………………………………………………………………….. 57

3.1       Applications Development                                                                                                 57

3.2       Development Environment                                                                                                61

3.3       Feasibility Study                                                                                                                61

3.4       System Analysis/Specification                                                                                           62

3.5       System Design                                                                                                                   62

3.6       Invitation to Tender/Contract                                                                                             63

3.7       Implementation                                                                                                                  64

3.8       Post-Implementation Review                                                                                             64

3.9       Service Orientation                                                                                                            65

4 KEYS TO MEASURING AND MONITORING SERVICE;  DESIGNING AND IMPLEMENTING AN SLA…………………………………………………………………………………………………………………….. 67

4.1    Introduction to Service Measurement…………………………………………………………………. 67

4.2       Measuring Performance and Availability                                                                          68

4.3 Monitoring Tools and Their Use                                                                                              70

4.4  Application Monitoring                                                                                                          71

4.5     Network Monitoring                                                                                                            72

4.6      Case Study                                                                                                                          74

4.7   Systems Monitoring                                                                                                               74

4.8      Satisfaction Monitoring                                                                                                      75

4.9 The Service Management Toolkit                                                                                            76

4.10  Monitoring & Litigation                                                                                                       78

4.11     Balancing Detail with Practicality                                                                                     78

  1. 12 The Balanced Scorecard 79

4.13     What to include in a SLA                                                                                                   80

4.14     Shell, Template, Model and Standard SLAs                                                                      83

  1. 15 The Service Handbook 87
  2. 16 Service Level Survey 88

4.17     Charging for Services                                                                                                       90

  1. 18 Infinite Capacity and 100% Availability? 96

4.19     Realistic Limits to Service                                                                                                 98

4.20  Penalty Clauses                                                                                                                   100

4.21  Planning For Change                                                                                                           103

4.22     Organizational Issues                                                                                                       103

4.23     Preparing the Ground                                                                                                       107

4.24     Pilot Implementation                                                                                                        108

4.25     Negotiating with the Customer                                                                                        110

4.26    Reporting Actual Performance Against SLA                                                                   111

4.27     Service Review Meetings                                                                                               121

4.28     The Customer Review Meeting                                                                                      121

  1. 29 Service Motivation 122

4.30     Extending SLAs                                                                                                               123

Annex One: Example Customer Satisfaction Survey                                                                  125

Annex Two: Example Service Level Survey                                                                               130

Annex Three: Terms of Reference for Marketing & Sales Manager and Accounts Manager    134

Annex Four: Monitoring Tools – Web Addresses                                                                        137

5   THE DOWNSIDE RISK; ALTERNATIVES TO SERVICE LEVEL AGREEMENTS; THE SLA PAYOFF…………………………………………………………………………………………………………….. 139

5.1     SLAs: Reasons for Failure                                                                                                 139

5.2       Alternatives to SLAs                                                                                                       141

5.3       Performance Indicators                                                                                                   142

5.4       Availability and Response Targets                                                                                  143

5.5           Benchmark Checks                                                                                                      146

5.6              Business Satisfaction Analysis                                                                                 147

5.7       The SLA Payoff: A Success Story                                                                                  153

5.8           Where Next?                                                                                                                154

5.9       Conclusion                                                                                                                      155

APPENDICES                                                                                                                            157

APPENDIX A: SERVICE LEVEL AGREEMENT CHECKLIST                                      159

APPENDIX B: Example Desktop Support Metrics                                                                185

APPENDIX C: TRADITIONAL, IT-ORIENTED SLA …………………………….191

APPENDIX D:  Example Simple Development SLA                                                              207

APPENDIX E:   Checklist for Outsourcing & Facilities Management                                221

APPENDIX F:   EXAMPLE DESKTOP SUPPORT SLA                                                     225

BIBLIOGRAPHY……………………………………………………………………………………………….. 273

ABOUT THE AUTHOR………………………………………………………………………………………. 275

Figure 1.2: Serving the Business…………………………………………………………….. 11

Figure  2.2:Definitions for Telecommunication Service Levels……………………… 44

Figure 3.1: Development using FPA………………………………………………………… 60

Figure 3.2: Development Environment…………………………………………………. 65

Figure 4.1: Service Management Toolkit…………………………………………….. 77

Figure 4.2: Example of Balanced Scorecard…………………………………….. 80

Figure 4.3: The One Page SLA Format…………………………………………………….. 85

Figure 4.4: The One Page SLA Format…………………………………………………….. 86

Figure 4.5: Components of Service Level Management…………………. 89

Figure 4.6. Charging for Computing Services – Schematic………….. 94

Figure 4.7. Back-to-Back SLAs…………………………………………………………………. 100

Figure 4.8: Cost of Real-time Service Outages………………………………. 101

Figure 4.9: Hierarchy for SLA Implementation………………………………… 104

Figure 4.10: Customer Account Manager: Liaison Points……………. 106

Figure 4.11a:  Monthly Report……………………………………………………………….. 112

Figure 4.11 b: The Same Data, Weekly Report…………………………………… 113

Figure 4.11c: The Same Data, Daily Report………………………………………… 113

Figure 4.12. SLA Reporting Schematic…………………………………………………. 115

Figure 4.13: Global Service Report – Schematic……………………………. 117

Figure 4.14a: Sample SLA Report…………………………………………………………… 118

Figure 4.14b: Batch Service Level Report…………………………………………. 119

Figure 4.15. Computing Center – Mainframe Availability, 0800 to 2000 hours..120

Figure 4.13. Components of Service Level Management…………….. 124

Figure 5.1. Explicit Service Targets……………………………………………………. 144

Figure 5.2a: A CAD Benchmark…………………………………………………………………. 148

Figure 5.2b: CAD Response – Benchmark Drawing Time…………………. 149

Figure 5.2c  CAD Response – Benchmark Drawing Time…………………. 150

Figure 5.2d: CAD Response – Benchmark Drawing Time…………………. 151

Most suppliers lose around 16% of their customers each year. The reason? Poor service. Typically if you provide good service, your customer may tell five people. “Customer promiscuity” is the norm: your customers and prospects are one click away from your competitors. Discontented customers typically tell over ten people how bad you are.  In the days of bulletin boards, a discontented customer can place messages that can impact – maybe even destroy – your business. In the often dangerous and unpredictable e-world, Service Level Agreements are imperative to protect both parties.

Any support service, whether in-house, contracted or outsourced, stands to be accused of being insensitive to the requirements of its customers (or users).  Equally, customers of a support service may have unrealistic expectations of what can be reasonably provided by it. Service Level Agreements can overcome these gulfs.

All too often service level reports are misleading: bad statistics, measured in ways and at points that do not truly reflect the service experience of the customer. This book exposes pitfalls, problems and challenges in e-business Service Level Agreements and lays the foundation for harmonious and effective customer-supplier relationships to enable actual service delivery to become aligned to customer expectations.

What, then, is a Service Level Agreement? A Service Level Agreement is simply an agreement between the support service and the user quantifying the minimum acceptable service to the user. SLAs are particularly valuable in real time activities of e-commerce where speed-to-market is crucial; where there is no time for mistakes; and where millions of dollars can be lost in minutes.

A Service Level Agreement can create harmony between the parties, and avoid disputes between customer and supplier.  It can justify investment and identify the “right” quality of service.  It can mean the difference between business success and failure.

Dr Yvonne Gunn

Kingswell International

 

Some 15 years ago, the UK IBM Guide Operations Managers group (of which I was Chair) held a meeting in which we discussed the concept of SLAs.  I had read about the pioneering work in this area by Bill Miller of American Airlines and developed by the Capacity Management Group. Seizing on the concept as good management practice, I first implemented them in the company for which I was then working. It really was leading edge stuff in those days and there was little guidance, so in 1988 I began to present training workshops on the topic.  These aroused considerable interest and I was persuaded to write the first book on the subject, published by Elsevier. Believing this concept was equally applicable to any support or supply service, the second book, suggesting this transition, quickly followed.   We began to receive inquiries about SLAs from a wide range of public and private sector enterprises, covering a broad spread of business and support functions. Since then we have presented on SLAs at conferences and workshops around the world and written literally hundreds of articles on the subject.

My vision in SLAs is simple: SLAs are potentially a strategic tool to align all support services (especially IT) directly to business mission achievement.  Sadly, few organizations use them in this way.

The early SLAs were IT-centric, written in IT technical terms, and predominantly provided the IT user with service levels that had more to do with internal IT performance measurements than with business-oriented service achievement. Frequently metrics were inappropriate, measurements imprecise and monitoring weak. The SLA reports simply did not reflect the experience of the customer when using the service. Now, the more mature organization writes business-centric SLAs and has sophisticated performance measurement tools that accurately reflect the customer’s or service user’s actual experience. Unfortunately, we are now seeing the legal profession moving into the field of drafting SLAs, changing the concept from a crystal-clear definition of the service and of service levels, back into a muddy, legalistic puddle.

Back full circle?  It’s time to start over.

That is why this book is particularly important today.  We must keep the service vision, definition and requirements clear – even more important today in a time of loose partnerships, complex – often virtual – supply chains and instant success or failure. In the e-world, particularly, customers are just one click from desertion.

Where are SLAs going? Increasingly business-focused. Increasingly measured in real-time. Simple documents that cover complex service infrastructures.  Providing competitive edge. Embracing penalties.  The brave, who commit to tight SLAs and perform against them will win the commercial spoils.

Andrew Hiles

 Oxon Bagpuize, England

 

  1. Do formal Service Management/Installation Management procedures exist to manage:
  • Service levels?
    · Capacity?
    ·           Availability? 
    ·           Performance?
    ·           Problems?
  •    Requests?
  • Change?
    ·           Operations?
    ·           Security?
  • Infrastructure?
  • Environment?

 

  1. Are these formally documented and:
  • reviewed periodically (e.g. 6-monthly)?
  • subject to formal change procedure when new applications/systems/hardware are brought in

             with documentation available Telecommunications

             and to Operations, Systems, Customer

             Support management and staff?

  • issued automatically to new incumbents of these

           posts on arrival?

  • are end-users (customers) aware of them?

 

  1. Do Service Level Agreements exist for all applications?

 

  1. Do they cover all services?

 

  1. And all customers?

 

  1. And all key suppliers?

 

  1. Do these Service Level Agreements specify:
  • customer workload in business units (e.g., number of invoices produced)?
  • forecast changes over the duration of the agreement?
  • customer workload in terms of performance and capacity management?
  • peak workload?
  • peak workload constraints to limit peak capacity?
  • security?
  • disaster recovery?
  • key records needed for recovery?
  • arrangements for monitoring customer satisfaction?
  • reports of actual service delivery against service targets

            –           for computing service management
             –           for customers

  1. Are service level targets included in Project Specification?
  2. Are they included in application and hardware contracts?
  3. Are they included as part of system acceptance testing?
  4. Is there a formal sign-off stage at which the computing service accepts new applications as production systems

 

  1. Is there a formal sign-off stage at which the end-user (customer) accepts that new applications are meeting service level requirements?
  2. Is service performance checked against the service requirement specification at Post Implementation Reviews?
  3. Are Service Level targets set by the if/MIS/Computer Service provider:
  • for each type of usage (e.g. real-time by transaction complexity, batch turnaround, output etc)?
    ·           for each regime (e.g. prime, non-prime, weekend)?
  1. If so, are they published to their customers?
  2. Are customers committed to forecast their utilization?
  3. And keep to their forecasts?
  4. Do Service Level Objectives form part of the Computer Service job descriptions and targets for Management by Objectives (MBO)?
  5. Is the computing service charged out?
  6. If so:
  • are rebates given to customers for failure to achieve Service Level Objectives?          
  • and are any penalties applied if customers exceed utilization forecasts?
  1. Has a Customer Satisfaction Survey been issued within the last 6 months?
  2. If so, does it give scope for customer response on adequacy of Service Levels?
  3. And is the Service Level perceived as:
  • better than 12 months ago?
    ·        worse than 12 months ago
    ·        constant?
  1. Are Service Level Review Meetings regularly held with customers to review actual achievement against service level targets?
  1. Are utilization and performance statistics provided to assist this review?
  2. Is performance measured at the customer’s terminal?
  3. Do Computer Operations and Customer Support staff know the value of their customer’s applications:
  • in terms of income to the computing service?
  • in terms of value to and impact on the business in the event of downtime?
  1. Are the relative priorities of each service or application established:
  • for performance?
  • for recovery?
  1. Does each application have a designated and documented owner?
  2. Has one person been nominated as responsible for all day-to-day aspects of the running of that application?
  3. Do customers have a single point of contact within the computing service for any queries, complaints or problems about the service (e.g. a Help Desk)?
  4. Is this single point of contact documented and promulgated to customers?
  5. Is there a single point of contact in the customer area for the computing service regarding service queries?
  6. Is the single point of contact documented and promulgated within the computing service?
  7. Are all customer problems (even “trivial” problems) logged?
  8. Is a formal, documented escalation procedure in place for customer problems?      
  9. And is it promulgated to all relevant computing service staff and to customers?
  10. Are computing service responsibilities unambiguously defined, documented and promulgated so that this single point of contact knows who, within the computing service, to approach to resolve any query, complaint or problem which arises?
  11. For each application and process:
  • is there an inventory of hardware and software? _
  • is there a configuration diagram showing inter-related hardware and software?
  1. Are customer problems interfaced to computing service problem management procedures for hardware problems, software problems, telecommunications problems etc?
  2. Are customer problems interfaced to computing service change management procedures?
  3. Is change management procedure extended to all changes – including documentation and personnel?
  1. Are there back-to-back Service Level Agreements with other internal and external suppliers on whom the computing service relies to provide the service?
  2. Are formal quality assurance and quality control in place?
  3. Are zero defect goals in-place?