Flexible Service Levels Agreements: Fostering Trust and Commitment
Service level agreements, or SLAs, are contracts entered into by service providers and an end user—typically another business. Both large and small businesses utilize SLAs with service providers, though at least arguably it is the larger businesses who possess more bargaining power when contracting under SLAs.
In addition, SLAs are out-based contracts that exist primarily to provide specifications about the levels/metrics of services that are expected to be received. However, SLAs do not define the actual service that will be provided or delivered. The typical metrics specified in SLAs include:
The number of users that can simultaneously receive services;
Specific performance benchmarks to be compared to the actual performance of the contract;
The percentage of the timeframe during which services will be available and accessible;
The process for providing advanced notification for network changes; and
The service usage statistics that will be provided.
Research published in the Management Information Systems (MIS) Research Center has revealed that in the case of SLAs, those contracts that are more broad and allow for flexibility have been shown to build trust amongst parties.
The MIS Research Findings on SLA
The MIS study focused specifically on SLAs entered into by IT outsourcing vendors and businesses. The main goal of the study was to expand on existing research that refuted the idea that contracts are antithetical to trust creation amongst parties. It was discovered that more detailed SLAs can actually foster enhanced degrees of commitment and trust amongst parties. This process begins at the very beginning of the SLA creation process.
Crafting a detailed SLA forces all involved parties to work together in order to create and reinforce trust between vendors and clients. During this stage of the negotiation process, the parties begin to get a good idea of the factors motivating the other side, and are also capable of understanding what to expect from one another during the course of executing the contract.
The MIS research is unique in that it illustrates how too much specificity can be detrimental to SLAs with regards to clauses that discuss the planning and anticipation of contractual change. This part of the process was illustrated to potentially reduce the trust of the parties involved. This aspect of contracts amplifies the inherent degree of uncertainty that comes with contracting with others. However, MIS advises that in the face of such uncertainty, the issues can be mitigated most effectively by taking an adaptive approach to negotiation. A more adaptive and flexible approach can cause a mutual give-and-take process in a more intimate setting, as opposed to taking an arms length approach that focuses on crafting very standardized and detailed clauses for the contract.
Small businesses should take care with regards to the flexibility and specificity of the clauses underlying SLAs. If you need contract review services for your SLAs or any other small business law-related issues, contact the Naperville small business law attorneys at the Gierach Law Firm today for experienced legal assistance.