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The Benefits of Offering SLAs
By Tom Sweeny, ServiceXRG

If your company has ever considered offering SLAs but has been concerned with the potential downside of increased customer expectations, consider the impact of not managing these expectations. When left to their own devices customers will set their own expectations for a reasonable level of service. Failure to meet these expectations is the leading cause of customer dissatisfaction. When you do not take a proactive role in setting expectations you are at the mercy of customer expectations for which you have had no role in influencing. SLAs are not only beneficial for managing customer expectations, they are also an important vehicle for communicating the value of service.

What Customers Value

A speedy response and an effective solution are characteristics customers value most in a support relationship, yet few customers are actually aware of the level of performance they can expect from their service provider. The majority of IT users surveyed by ServiceXRG indicate that they do not have or are not aware of established performance guidelines or commitments.

Why do customers buy support if they have no understanding of the level of service performance they can expect? In some cases, customers want the comfort that a maintenance contract brings them, but don’t bother to consider how their provider’s service-delivery performance might affect them should they actually run into problems. In most cases, however, even the peace of mind that a service contract might bring isn’t enough to compel customers to buy support and maintenance. The ability to sell a service contract often requires a more compelling value proposition bolstered by SLAs.

The Role of SLAs

A key component of any strategy designed to increase support sales and renewal rates is the ability to communicate the level of service performance a customer can expect. At the heart of a successful support marketing message must be a convincing statement that describes the actions, level of effort, timing and expected outcome triggered by a support request. These may be expressed as targets, commitments or guarantees. The most common vehicle for conveying this value is the service-level agreement (SLA).

Service-level agreements are an essential ingredient to designing a compelling service value proposition yet offer more then just marketing value. SLAs provide a basis for setting and managing reasonable customer expectations. With the sale of a support or maintenance contract comes a customer’s expectation for a level of performance. Customer dissatisfaction with service largely stems from a failure to meet such expectations. The type of agreement and spectrum of coverage described within the SLA must be driven by a proper balance between the reasonable needs and expectations of customers and the delivery capabilities of the service organization. Realistically, a service provider should only set expectations at a level where their service-delivery capability can meet or exceed the expected performance levels.

SLA Benefits

ServiceXRG finds that most customers with SLAs believe that their service providers meet the terms dictated by their SLAs. This suggests that customer perceptions of service-level performance are not only favorable, but consistent with the expectations established through their SLAs. ServiceXRG also finds that users covered by SLAs are more likely to receive better service performance than users not covered. IT users covered by remote response-time SLAs, for example, report that it takes 1.8 hours on average to receive a response to their reported issue, while users not covered report that their average response is more than 200 times longer.

Average Remote Response Time


Source: ServiceXRG

The very existence of SLAs significantly helps vendors assure a positive service experience. These positive feelings are further compounded when SLAs are met. As previously noted, customers are generally content with their vendors’ SLA compliance levels, but have very little tolerance for missed performance goals. Conversely, customers that are not covered by SLAs are likely to give their vendors far more latitude in service-level performance. Still, when SLAs are not in place, the chance of a negative service experience increases significantly.

The Effect of SLAs on the Service Experience


Source: ServiceXRG

Establishing the Right SLAs

SLAs offer significant benefits to a service provider by helping them set and manage customer expectations and are integral to conveying the full value of services. Moreover, the ability to meet service-level agreements is key to providing a positive service experience. Although it can be a daunting step to introduce SLAs, it is not a commitment to deliver the impossible. A service level agreement can be as informal as a performance target or as rigid as a committed time to restore a system to operation backed by penalties. In either case the SLA serves as a basis for establishing a shared understanding of the service relationship. When properly developed SLAs offer a win-win situation for both the service provider and the customer.

Remember that the “right” SLAs need not be a commitment to do the impossible, nor should the committed levels of service be under-valued or under-priced. The “right” SLAs are those that meet the following criteria:

  • The level of service can be delivered most (>90%) of the time.
  • The SLAs add value to the overall support and maintenance programs offered.
  • The service levels offered are consistent with customer expectations (e.g., speed of response, restoration, uptime, etc.).

For More Information

ServiceXRG conducted a study of 350 information technology users to understand their perceptions and expectations regarding the level of service they receive in response to requests for technical assistance from their IT service providers. The study examines service-level performance and its effect on the overall customer service experience. This report examines the use of SLAs, as well as the effectiveness of developing and delivering an agreed-upon level of performance in creating a compelling value proposition for support and maintenance services. A full copy of this study and other related report and articles are listed at www.servicexrg.com.

About ServiceXRG
ServiceXRG specializes in helping companies develop and execute service and support strategies that strengthen customer relationships and optimize financial performance from service operations. ServiceXRG’s research provides a balanced perspective of the IT services industry with views from users, service professionals and suppliers. ServiceXRG combines years of real-world service industry expertise with a unique ability to collect, analyze and present high-quality industry data. ServiceXRG provides management consulting, custom benchmarking, competitive analysis and customer satisfaction assessment, and publishes a series of reports on industry trends and best practices. For more information, visit www.servicexrg.com.