June 21st, 2019
Legal Talk 24: How do I deal with a Service Level Agreement, any tips?
You call again. “Another Quick question for you Legal Coach. The customer we are selling in our software and services to, has agreed the letter of agreement! Which is fantastic news, but they said that they need an SLA (Service Level Agreement). What is that?” You ask.
Well, the SLA is just an agreement where you agree to certain service levels that you have to meet or exceed. If you fail to do so then normally there are "penalties" (in the form of service credits or compensation payments) that you have to pay the customer. SLAs are quite useful because they set the benchmark to be attained. Here's another link for another definition! https://www.techopedia.com/definition/24420/service-level-agreement-sla
There is a knack to drafting SLAs though. From your point of view, you don't want to pay penalties to the customer and so it is a good tactic instead to suggest that if things go wrong that you will put together an action plan to put things right, but importantly, that you won't pay back any money.
You can get templates for SLAs on the internet and I can cast my eye over one once you have added details of the customer and product etc.
“Is there any kind of checklist that I should follow?” You ask.
Well, I suppose I can provide a few tips here:
1. Set your own Service Levels: Get information from the customer as to what kind of service levels they are expecting. Normally the customer will not have measured this before internally. and so maybe it is a good idea to propose your own service levels as a starter because at least you know you can meet these.
2. Set just a few Key Performance Indicators (KPIs): Try to suggest just 3 or 4 KPIs to meet and set ones which you are confident of achieving. Just a few KPIs are easier to focus on for both you and the customer and is easier for everyone to administer and check.
3. Business focus: Try to negotiate the SLA with a business focus rather than just a legal focus or an IT focus. Essentially if the KPIs in the SLA are met or exceeded then you should have a happy customer.
4. Keep it short & simple: SLAs often go wrong because they are too long or too complex. In either case, the SLA is typically shelved and the account managers for both customer and supplier just deal with problems on an ad-hoc basis. The problem with this approach is that there is no consistency and it is hard for anyone to figure out later on how problems have been dealt with. So, making the SLA really simple and sticking to it is critical.
Of course, it should be used as a flexible document and so if it turns out that it needs to be changed (either because the KPIs are too stringent so you will never achieve them or too lax so that you could achieve them in your sleep) then you should be able to talk about and change the SLA as the project moves forward.
5. Lawyer check: I can cast an eye over your SLA once you have drafted it but anything more than a few pages and it will start to get too complex and you risk no one ever looking at it again.
6. Upsell: Often my start-up and larger clients use the SLA as a marketing tool because it is a great way to meet your customer, flush out problems that your customer might be having and then suggest other solutions or upsells to what you are already providing to your customer. What you might find is that your customer will really welcome your ideas and input as to how they can make things better for themselves. This may result in more sales for you
“Thank you for the tips! By the way, have you got a template that I can use?” You ask.
Yes, I say. I thought you might ask for that. If you fill in the template then I will check it, and you can send it over to your customer for signature.
You say that this is going to help a lot and that once you get this customer on-board you will use the same process with new customers. Fantastic! I’ll get to sending you that template then.
With best wishes,
Your Legal Coach
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