Back in March, I discussed the creation of service levels for the first time. I talked generically about how to create a service level and what key components were part of the process. At this past weeks’ IT Financial Management Conference, one of my sessions focused on performance guarantees (which is just a broader description that includes service levels). What I realized is that, along with maintenance percentages and other negotiable items, buyers have long been reducing their demands – which has increased the “boldness” quotient for our vendors.
So first, as with these other contract sections, please let me remind you that your actions DO impact others. The less you ask for now, the less I’m going to be able to get without a struggle later.
More importantly, however, is that you should remember that there are two primary classifications of performance guarantees.
First, Service Levels (and Service Level Agreements). SLAs, in my view, are to describe guarantees related to the performance of contractually-agreed upon services. This means that SLAs are usually used to measure performance against response and repair times in your maintenance agreement. In other words, SLAs measure quality. How well did the vendor do with respects to performance?
Obviously, you have to have stated response and repair times to make these work – and such times will also usually be based on a “severity” level determination, too. Thus, outages for Severity 1 (high) will require a much faster response than those for a Severity 4 (low) problem. But with proper definition, you can cover your bases adequately.
Second is the use of Standard Performance Obligations (SPOs). These are the types of things I was really talking about in the last post on SLAs. The distinction here is that an SPO is measuring output/availability/quantity as opposed to quality. So a SPO would cover uptime/downtime or the number of widgets your software is supposed to process in a given time frame, etc.
See the difference between SLAs and SPOs?
Your contract might need both for you to be sufficiently covered for any particular issue. Both require good definitions, measurability, reporting and “incentives” to meet the guarantee. But each one measures something a bit different than the other and it’s important to cover both.
How do you measure performance in your agreements? Comment below!