Negotiating Service Level Agreements is a non-trivial task and yet CIOs only focus on the legal nuts and bolts ignoring other value opportunities.

Determining how much room to maneuver there is in service level agreements is key for controlling costs as well as making sure you’re getting favorable terms, in keeping with your budget. Whether you are a relatively new chief information officer or have been heading IT for some time now in your organization, it’s useful to consider how others handle negotiations for SLAs and apply the advice to your enterprise.

Advice for CIOs in Negotiating Service Level Agreements

Establish Metrics for Performance

From specifics of guaranteed up-time to how quickly the provider aims to gets you back online after a failure, you’ll want to delineate the metrics of performance in the service level agreement.

Are Some Terms Non-Negotiable while Negotiating Service Level Agreements?

You may run into providers that assert that these are the terms they are offering and that they do not have authority to negotiate. For example, Contract Nerds reports that “SaaS vendors commonly claim that their SLAs are non-negotiable. That is usually not true. If you’re on the receiving end of this all too common phrase, you don’t have to stop there. You have options. You can use a combination of negotiation strategies and subject matter expertise to find the penetrable soft spots and land better contractual terms.”

But if the SLA provider cannot negotiate with you on a particular sticking point, you will have to accept that they mean “No” and then come up with an alternative. You could, for example, ask about upgrading the level of customer service or adding more time to the terms of your subscription in exchange for the terms you’re seeking.

Another point of negotiation could revolve around business unit level SLAs. For example, Enterprisers Project asks, “if an invoicing module and core financial both are offline, will the provider(s) be in sync with remediation timelines to get accounting and receivables back online together?” Your request for this option in the SLA may be categorized as an upgrade that you can potentially leverage for better terms overall in the agreement.

Where Does Maintenance Fit In the SLAs?

When negotiating an SLA, make sure that maintenance is covered in detail. You’ll account for planned maintenance, which of course is the prudent way to go in lowering the total cost of ownership of your system.

The downtime for routine maintenance will not count toward the SLA’s guarantee of uptime, though. But downtime that results from a covered emergency will count toward the guaranteed uptime and availability of service.

Escape Clauses in Service Level Agreements

Of course, a CIO will include termination rights in a contract. Termination rights are part of the scheme to protect your enterprise in case the SLA provider fails on multiple occasions in a designated period (such as in a quarter) or after a single major failure. But you’ll also want to include an escape clause.

Despite your best efforts to make a good match between your enterprise and a service level agreement provider, it may turn out you are not a good fit after all. If there are ongoing issues with the provider failing to meet defined objectives or otherwise not performing per the agreement, an escape clause gives you a measure of protection.

So spell out what the measurements will be and how often you will review performance levels. There’s no reason for you to be tied to an SLA if the provider can’t be consistent in service, especially when you have specified the benchmarks and the timing of evaluating them.

Rewards and Penalties

Enterprises focused on boosting efficiency can rely on the carrot and the stick to motivate SLA providers to execute according to the terms of the agreement. So you will want to ensure that you describe rewards and penalties as you negotiate the details of the SLA.

Since service outages can have a mammoth impact on your enterprise’s operations, one of the more important points of negotiation will have to do with penalties for outages, along with bonuses when the provider meets or exceeds high-performance benchmarks.

How Does the Provider Calculate SLAs?

“A shift we’re beginning to see is an increased use of data and process discovery tools to measure SLAs,” said David Borowski, director at business and technology consultancy West Monroe in a report from CIO. “While not pervasive yet, these tools represent an opportunity to identify the most meaningful metrics and objectively measure performance.”

For example, you’ll measure quality and compliance, and by using your tools, you don’t have to rely on the providers to obtain data on performance.

Get Everything in Writing

Make no assumptions about what requirements will be covered in the SLA. If you don’t put it in writing, you won’t be able to point to a clause that shows the provider didn’t meet a benchmark.

Beyond20 noted that “documented SLAs also help IT staff understand which incidents, problems, and requests to resolve first, and allow IT leadership and customers have productive, data-driven discussions around where to spend money.” The idea is that since it is too costly to arrange for all IT services to be available to you day and night, you will want to rank which are the most important services to your enterprise and allocate most of your spending there.

Aim for SLAs that are easy for you and your team to understand, with terms defined whenever you detect ambiguity. After all, since your professional training covers technical details but you have no legal background, you will want to verify the terms without needing an army of lawyers at your side to help interpret the agreement.

There cannot be fuzzy benchmarks. For example, it’s not very useful to read that service will be “fast” or “outstanding” when what you will need are specific measurements. Beyond20 reminds CIOs to “stick with specific time frames for ticket resolution, availability, etc. – you’re looking for anything that can be referenced and clearly reported upon.”

Your definition of what is a reasonable amount of turnaround time might be 30 minutes, while the provider may think that 24 hours is a reasonable response. You’ll need to hold them to these specifics, as you will be advising your company about when they can expect a resource to be available again, which they will be counting on as they plan how to respond to the unexpected shutdown.

Negotiating SLAs For Budget as Well as Quality Standards

When you are depending on service level agreements to help keep your enterprise humming along, it’s of critical importance that you negotiate the terms not only so they are favorable to your budget but also your enterprise’s standards for uptime.

Clarifying who is responsible for tracking performance and being as specific as possible about what’s expected should be par for the course. You certainly don’t want to have to rely on the SLA provider to be tracking and making reports. Both parties must accept the details of performance reports for this to be a true partnership.

And you’ll always need to schedule periodic reviews to make sure the provider is delivering to your benchmarks, no matter how good their reputation is in the industry. Without a clear exit path, with termination rights and escape clause concerning poor performance, you risk tying your fortunes to an SLA provider that may not be able to meet the standards.

How does your enterprise deal with negotiating Service Level Agreements?