# Presentation: 528521

## Service Level Agreements

## Service Levels Defined

- Service Levels are:
- Measures of the quality of the services rendered
- Critical for business operations and support
- Incentives for Service Provider to make appropriate business decisions
- Training
- Methodology Implementation
- Staffing
- Service Levels reflect current business needs
- Company needs are certain to change
- Service Level Agreement should provide the mechanism to allow evolution
- Company should define, not negotiate, its priorities

## Service Level Objective

- Implement Methodology that will be flexible enough to:
- Adapt service levels to reflect business priorities
-  Create new service levels
- Add / Delete service levels to reflect business evolution
- Continuously improve performance
- Avoid constant negotiations
- Protect Service Provider from unanticipated risk
- Guide Service Provider proactively
- Increase probability of meeting Company desired service
- Decrease probability of financial consequences

## Service Level Building Blocks

**Service Levels**
- Critical
- Key
**Attainment Levels**
- Minimum
- Expected
**Performance Categories**
**Amounts at Risk**
- At Risk Amount
- At Risk Pool --  Available for Allocation
- Allocation of At Risk Pool to Performance Categories
- Allocation among Critical Service Levels within Performance Categories
**Critical Service Level Matrix**
**Continuous Improvement**
**Earnback**
**Ability to add - change - delete**

## Service Level Measurements

- Critical Service Levels
- Critical to the welfare of Company
- Service Level Credits are** **_**DUE**_ for Service Level Default
- (defined as failure to attain *Minimum* or _repeated_ failure to attain *Expected*)
- Key Measurements
- Measurements are meaningful to Company’s business
- Service Level Credits NOT DUE for failure to attain
- May be candidates for Critical Service Levels
- Same format (Expected / Minimum) as Critical Service Level

## Service Levels Minimum and Expected

- Each Critical Service Level has *Minimum* and *Expected* Service Level,
- e.g., for Percent of Maintenance Programming Changes Delivered on Time,  on a monthly basis
- Expected:   95% shall be complete on schedule
- Minimum:  90% shall be complete on schedule* *
*Expected* Service Level
- This is _the service Company is purchasing_
- A service level default shall be determined to occur _AFTER the 3rd failure_ to achieve in a rolling 12 month period
*Minimum* Service Level
- This is _“bad service”_
- Level of performance below which a Service Level Default shall be deemed to occur

## Service Levels Performance Categories

**Performance Categories**
- Established after brainstorming “What is important to Company?”
- Keeps focus from getting  lost
- Logical Grouping of Critical Service Levels
**System Availability**
- Applications
- Call Centers
- Other Major System Areas
**Maintenance Support**
- Percent of Business Deliverables without Errors
- Percent of Maintenance Programming Changes Delivered On Time
- Percent of Cost Overruns
**Staff Support**
- Retention of Key Staff
- Percent of Staff Scheduled/Staff Completed

## Service Levels At Risk Amounts

***At Risk Amount***
- Percentage of Total Monthly Charges placed at risk by Service Provider
- Tied to attainment of Critical Service Levels
*At Risk Amount* is _based on total monthly charges_
- Not to charges by service category  or limited to Contracted charges
- Excludes pass-through amounts
- Represents Service Provider’s_ maximum exposure_ for Service Level Credits
- Allied month by month; not lump sum for whole contract
***At Risk Pool***** *****Available for Allocation***
- Multiplier of the *At Risk Amount*
- i.e., 150% is 1.5 times the *At Risk Amount*
- Does _not increase_ Service Provider’s exposure to *At Risk Amount* cap
- Enables meaningful allocation of the *At Risk Amount* across Performance Categories and, in turn, across Critical Service Levels

## Service Levels Allocations of At Risk Amount

***Allocation of At Risk Pool***
- Portion of *At Risk Pool* allocated to each Performance Category
- Total of the *Allocations of At Risk Pool *cannot exceed the *At Risk Pool* percentage
***Allocation***** to each Critical Service Level within Performance Category**
- Percentage of *Allocation of At Risk Pool *associated to each Critical Service Level within a Performance Category (percent of a percent)
- Total of the *Allocation*s of the* Allocation of At Risk Pool *cannot exceed 100% for all Critical Service Levels _within_ a Performance Categor

## Service Levels Continuous Improvement and Earnback

- _Continuous Improvement _
- Company is buying service for now and the future
- Company is entitled to benefits derived from technology / competition
- _Earnback_ buying “today’s service, for now and the future”
- Review on operational anniversary date
- Review performance on an individual Critical Service Level basis
- If the _yearly average meets or exceeds the Expected Service Level_:
- any Service Level Default for that Critical Service Level is forgiven
**Continuous Improvement and Earnback rights are tightly coupled**

## Service Levels Modify Performance Categories

- Company can unilaterally **add **or **delete** a* ****Performance category*** by providing notice
*Allocation of At Risk Pool  *for all *Performance Categories *must be reallocated such that the sum of all *Allocation of At Risk Pool *amounts* *do not exceed the* At Risk Pool *Available for Allocation
- Company can unilaterally **change** a* ****Performance category*** ***Allocation of At Risk Pool**** *by providing notice
*Allocation of At Risk Pool  *for all *Performance Categories *must be reallocated such that the sum of all *Allocation of At Risk Pool amounts *do not exceed the* At Risk Pool Available for Allocation*
- Company cannot unilaterally **change the actual value** of a  performance measure

## Service Levels Modify Service Levels

- The Company can _**DELETE**_ ***Critical Service Levels*** by providing notice
*Allocation *of* Allocation of At Risk Pool  *for deleted *Critical Service Level* must be reallocated to other *Critical Service Levels *within the* Performance Category *such that they do not exceed 100%
- The Company can _**CHANGE**_ the ***Allocation**** *of* ****Allocation of At Risk Pool**** *by providing notice
*Allocation *of* Allocation of At Risk Pool  *for *Critical Service Level* must be readjusted for other *Critical Service Level(s) *within the* Performance Category *such that they do not exceed 100%
- The Company can _**ADD**_ ***Critical Service Levels*** by providing notice and accumulating adequate measurements
*Allocation *of* Allocation of At Risk Pool  *for *Critical Service Levels *within the* Performance Category *must be readjusted such that they do not exceed 100%

## Service Levels Add Methodology

***Critical Service Level*** can be **added** by providing notice and accumulating adequate measurements
- Establish *Expected* and *Minimum* based on actual measurements
- Requires 9 months of measurements
- 9 Month average is Expected
- 9 Month low point is Minimum
- The date Company serves notice to establish, establishes that the 9 previous consecutive months are to be  used
- Alternatively, an industry standard with agreed *Expected* and *Minimum *levels may be negotiated
- Company can make multiple changes at the same time
- Changes can be made _once each calendar quarter -- to take effect in 90 days_

## Service Levels Summary

- For the Service Provider
- Establishes maximum *At Risk* *Amount *without excessive risk
- Fixes the size of the *At Risk* *Pool*
- Future adds/changes/deletions controlled by rules
- Earnback allowed
- For the Company
- Meaningful *At Risk * amount
*At* *Risk Pool* applied broadly enough to allow meaningful weight to individual Critical Service Levels
- Annual performance reset to ensure Continuous Improvement
- Methodology ensures flexibility to adapt with minimal negotiations