Service level agreements are designed to help parties to a service agreement agree on minimum standards of performance. Whether you are a customer or a supplier, here are some tips on negotiating the perfect SLA to suit you.

If you're a customer:

  1. Rebates: In theory, rebates for epic fails by the supplier to meet SLAs should cover your loss. In practice, they rarely do. A financial rebate won't change the fact that your system is down. Instead of pushing hard for rebates, consider what else can be done in practice to identify issues quickly and address them properly. Alternatively, think positive – ditch the rebate and propose a bonus for perfect SLA scores.
  2. Support hours: Support during US business hours won't help Australian-based companies. Make sure support is available when you need it, particularly if you're engaging an offshore provider.
  3. Resolution times: If your supplier won't commit to resolving an issue within a specific timeframe, try to negotiate target resolution times, particularly for business critical issues.
  4. Termination: Negotiate rights to terminate if the supplier fails to meet SLAs, including for repeated breaches. You don't want to be stuck with a crap supplier who doesn't have the right skills and experience to properly support your business.

If you're a supplier:

  1. Be clear about your service offering: It might seem obvious, but you must know the limitations of what you can and can't do. Don't close a deal you can't deliver on. It will come back to bite you.
  2. Response times: Ensure that response times are achievable. Unless you're compensated for making changes, don't vary your tried-and-tested severity levels and response times for anyone.
  3. No double dipping: Don't be pressured into providing indemnities for failing to meet SLAs if rebates are already in place. Ensure the SLA states that rebates are your sole liability.
  4. Rebate claims: Develop a notification and payment process for rebates with your customer. It should ideally be off your books quickly (1-2 months). No one likes a lingering liability.

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