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Service Level Agreements
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Service Level Agreements

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  1. Service Level Agreements

  2. 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

  3. 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

  4. 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

  5. Service Level Measurements • Critical Service Levels • Critical to the welfare of Company • Service Level Credits areDUE 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

  6. 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

  7. 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

  8. 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 PoolAvailable 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

  9. 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 Allocations of the Allocation of At Risk Pool cannot exceed 100% for all Critical Service Levels within a Performance Categor

  10. 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 • Earnbackbuying “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

  11. Service Levels Modify Performance Categories • Company can unilaterally add or delete aPerformance 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 amountsdo not exceed the At Risk Pool Available for Allocation • Company can unilaterally change aPerformance categoryAllocation of At Risk Poolby 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

  12. Service Levels Modify Service Levels • The Company can DELETECritical 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 AllocationofAllocation of At Risk Poolby 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 ADDCritical 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%

  13. 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

  14. Service Levels Summary • For the Service Provider • Establishes maximum At RiskAmount without excessive risk • Fixes the size of the At RiskPool • Future adds/changes/deletions controlled by rules • Earnback allowed • For the Company • Meaningful At Risk amount • AtRisk 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