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The rise of dis-service level agreements and how to combat them

20th Jan 2016
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In an increasingly competitive and digital age, there has never been a greater need for organisations to be ‘on top’ of their business processes and practices. Frequently this means that organisations turn to outsourcing business functions to third party suppliers in order to achieve the required levels of innovation, agility and customer service they seek. Yet, this approach does not come without risks. With everything from IT maintenance, telecoms, web hosting and network security being outsourced, each with their own contractual obligations and service delivery agreements in place, it has led to an increasingly complicated and tangled landscape for organisations to navigate through.

As service providers continue to face the pressure of reducing the risk of customer churn, whilst simultaneously maintaining high customer satisfaction, they are increasingly failing to meet their own service level agreements (SLAs) due to third party suppliers, or other departments within their own organisation, failing to meet their obligations. The resulting knock-on effect is one that could result in customers seeking an alternative provider due to perceived poor customer service or a service provider incurring financial penalties as a result of missed SLA targets. So how can organisations manage this intricate supply chain web?

Understanding where the black holes arise from

Early on, the supplier to SLA relationship is fairly straight forward, especially for service providers specialising in a single product. As more services are packaged together, and more customers with varying SLAs are added into the mix however, it becomes steadily more difficult to keep track. If resellers are used, even more variables are added into the equation.

A final layer of complexity is when you consider that most MSPs will themselves be relying on other services from multiple vendors, and dealing with their own complex array of SLAs. With all this to monitor, it’s very easy for firms to lose track of what level of support they owe each customer. This also means that when something inevitably goes wrong somewhere in the long IT supply chain all businesses rely on, they will have little visibility of how each of their customers will be affected.

To identify where issues may originate from in the outset, a good place to start is by looking at the terms outlined in the agreed contracts. More often than not there is a mis-match between the contractual terms agreed with third party providers and the variety of different types of contracts service providers are offering to cater for different customer requirements and service levels. 

For example, say a customer finds that their phone lines have gone down and they are no longer able to receive incoming calls. They would phone the service provider and expect the issue to be resolved within 24 hours, as outlined in the contract. However, the service provider has outsourced this function to another supplier and they have agreed to fixing any issues within 48 hours. Immediately there is a conflict in resolution times. The supplier manages to fix the problem within 36 hours so they met the SLA they agreed upon with the service provider. However, the service provider has missed the SLA with the, now unhappy, customer.

This mis-match can occur due to two factors. The first factor is a lack of comparison between the contracts that are being negotiated and those that are already in place. However, managing all these contracts and gaining that visibility is not an easy task. In fact, trying to keep track of diverse service contracts with complex customer hierarchies, billing structures and customer-configured products can be as time consuming as providing the service in first place.

The second factor is that often those negotiating the contracts aren’t the same individuals that will need to fulfil the requirements and don’t have visibility into what is viable. Those on the service desk should be empowered to take part in these contract negotiations.

Those organisations that are able to navigate this complex web successfully can quickly gain a reputation for delivering excellent products and services, making a name for themselves on the market and unlocking new growth. On the other hand, failing to manage the challenges will lead to repeatedly missed SLAs, leading to cancelled contracts, a bad reputation and even financial penalties and legal action.

Unpicking the tangled web for a holistic view of service contracts

In order to provide a smooth, joined-up service that meets customer demands, firms must be equipped with a central record of the web of relationships they have to navigate every day. It’s imperative to have a clear view of who needs what and by when, as well as linking all of this back to third party suppliers. Many firms still rely on a multitude Excel or even physical workbooks to keep track of these relationships, a clunky process that can no longer keep up with the speed required by modern IT services.

Instead organisations need to adopt a more centralised approach to contract and supplier management by using a solution that can not only manage the processes, events, and functions that impact on the effective operational performance of an organisation but that can also ensure that activities are in-line and tied to the contractual requirements of all involved parties.

For example, by making it possible for supplier and customer contracts to be mapped out, logged and tracked, they can then be much more efficiently managed as a part of the standard service desk reporting on the number of SLA’s hit or missed and the reasons behind this. Additional benefits gleaned from this approach also include the ability to log certain actions or controls to ensure that any compliance or regulatory requirements are accounted for and a full audit trail could be provided if requested.

One of the best places to turn for inspiration on how to achieve a more joined up approach is the internal IT departments of large corporations. These departments effectively operate as a service provider to their own organisation, constantly dealing with large numbers of external suppliers to complex and varied demands across the business. By adopting the IT service management practices of a high powered IT department, service providers can not only get to grips with today’s complex environment, but also excel within it.

The delivery of a high level of customer service and meeting SLA targets is a fine tightrope that many service providers and organisations find themselves tackling every day. As a result, they are under ongoing pressure to find a way to better manage the complex assortment of third party supplier contracts they need to juggle in order to meet their own increasingly varied customer SLAs.

There are many proactive steps that organisations can take, and practices that they can adopt, in order to make this task more manageable. By adopting an approach that provides them with a more automated and holistic approach to their service desk functions, it gives them the clarity they require so they can be confident in meeting their contractual obligations without fear of a financial or regulatory penalty or loss of customer confidence.

Neil Penny is product director at Sunrise Software.

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