Analyst: Chargeback too complex for most IT shops

Developing SLAs

Coyle said there was a lot of risk associated with developing service level agreements (SLAs) - be it between an end user organisation and a third party service provider, or the substantially simpler SLAs sometimes agreed between an internal IT department and the wider business.

Among the pain points were getting business users to spell out what they are looking for from systems (whilst being realistic about recovery times), and auditing the metrics provided by third party service providers (around outages etc).

"Often your service providers don't give you the full picture," Coyle said. "The argument becomes, was this particular incident an outage and by what definition? The tools might say it was a two-hour outage, users might say it was six. Whose tools are measuring this?

"If the service provider has the tools and can produce the reports - where is your proof as a user?"

Coyle said there are escalation clauses within contracts such that disputes can be taken to managers, then to CIOs, sometimes to CEOs.

"But you never ever want it to go that far," he said. "By then your relationship is dead. You never want to enforce a penalty. The loss to the business is higher than what money you'll get back from enforcing the penalty."

The key question is "how do I put incentives and penalities in place to drive the right behaviour?" Coyle said.

"If I measure an external service provider on the wrong things, I might only end up driving bad behaviour on their part."

Coyle used the example of an organisation that outsourced its service desk and created a system of penalties and incentives around whether the third party achieved high rates of "first contact resolution" - assuming it would mean customers would have their problems resolved quicker.

"What happened was, the outsourcer was given an incentive to keep a user on the phone at first level support, even in cases when it should definitely have been escalated to second-level support - to somebody that had the skills to solve the problem. You would have customers being on hold at first level support for two hours!"

Needless to say, customer satisfaction plummeted.

"They were furious," Coyle said. "It might have seemed like a good idea, but it wasn't based on the right outcomes. The SLA should have measured first contact resolution AND customer satisfaction."

With these issues in mind, Coyle gave iTnews three key considerations for developing an effective SLA:

• What is the balanced scorecard of metrics you will measure a service provider on?
• How are SLAs being measured and by whose tools? What exceptions are being made?
• End users need to include incentives and penalties into SLAs that drive the right behaviour - in the hope you'll never have to use them.