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How to select proper metrics and KPIs for SLA monitoring

Service Level Agreements are an essential part of modern business contracts. In this blog, you will learn about SLA monitoring, which comes after a service provider and a customer sign an agreement. SLA monitoring is important because it makes sure that the terms in the agreed SLA are kept intact.  This way, businesses can collect data and analyze and monitor it to derive insights that would have otherwise been difficult to obtain.


What is an SLA? 

A service-level agreement (SLA) is a document that defines the level of service expected by a customer from a supplier. SLAs specifies the metrics by which that particular service is measured and the penalties and remedies if the agreed-on service levels aren’t achieved. SLAs can be between companies and external suppliers, or even two departments within the same company. Only after both parties have signed an SLA can you begin SLA monitoring.

Benefits of having an SLA

Ceeview SLA Dashboard
  • Cost/savings – Providers can save resources.
  • Customer satisfaction – Customer issues are addressed quickly, leading to higher satisfaction levels.
  • Transparency – Clear guidelines enable the customer and service provider to be on the same page, making sure unmet obligations are accounted for.
  • Quick detection – By taking advantage of SLA monitoring, providers and customers can detect when an SLA breach has occurred or respond proactively if an SLA looks like it will breach.
  • Issue remediation – SLAs provide solutions when requirement levels have not been reached.

What is the difference between KPI and SLA?

Key Performance Indicators (KPIs) are used to measure how companies, businesses, or individuals perform against their strategic goals. KPIs help businesses know the specifics of how close or far the business is to achieving an objective. Thus, KPIs can highlight specific areas of the business that need improvement. 

An SLA can also be used to measure how the business is performing. However, it’s quite different from a KPI. Remember, an SLA is a clearly outlined agreement between a service provider and the end-user of that service. The main difference between a KPI and SLA is that an SLA defines the general agreement and service standards between service providers and their customers, while KPIs are used to measure and monitor performance levels.

How to design and verify service levels? 

To create or design a good SLA that will make SLA monitoring easy, you should make sure you include components from two critical areas: services and management.

Service elements include the specifics of the services provided. This means outlining service availability conditions, time windows for each service level, service/cost tradeoffs, and each party’s responsibility.

Management elements include the definitions of; measurement methods and standards, dispute resolution processes, and reporting processes. Other definitions falling in this category include indemnification clauses (protecting the customer from third party litigation due to service level breaches), and a way for updating the agreement.  Since service requirements and vendor capabilities change with time, ensure a mechanism is specified for updating the SLA.

To create the best SLA models that will make SLA monitoring easy, service providers need to understand their role and impact on an organization’s business outcomes. Using this approach, the culture changes towards a more strategic partnership between service providers, and the businesses that they serve.

To be effective, service providers should change how they measure service quality. They should find a way to align metrics to outcomes, e.g., revenue growth.

Verifying SLAs
Nowadays, most service providers have an online portal where statistics are available. SLA monitoring can be done by customers to check if SLAs are being met and to see if they are entitled to refunds as laid out in the SLA.

However, the best way to verify an SLA is for the customer and the outsourcing company to work together during the SLA contract negotiation to understand each other, the support method and process, as well as the management and reporting methods.

On the other hand, if customers are using critical services, they should invest in third-party tools to automatically capture SLA performance data. These will provide a precise measure of performance.

What kind of metrics and KPIs should be monitored? 

When doing SLA monitoring, the types of SLA metrics required will depend on the services being provided. First, examine your operation and determine what’s most critical.  When it comes to monitoring, the more complex the monitoring scheme, the less likely it is to be effective. Why? Because no one will have time to analyze all the data properly. Aim to keep the scheme as simple as possible to avoid confusion and additional costs on both the service provider and customer side. 

Therefore, opt for ease of collection of metric data. SLA monitoring using automated systems is better especially because the manual collection of metrics is costly and unreliable.

Once you have examined your operation, you can now monitor the following metrics (depending on service).

Service availability
This is the amount of time the service is available for use. Service availability can be measured by time slot; for instance, 99.5 percent availability required between specific business hours, e.g. 8am to 5pm, Monday – Friday or 24/7/365.

Business metrics
A business metric is a specified measure used to track the status of a specified business process. KPIs are the best approach to get business metrics if a vendor’s contribution can be calculated.

Technical metrics
Technical metrics are used to quantify and assess the critical technical attributes of delivered services. The main purpose of the technical metrics is to detect and fix issues before they impact the SLA. In SLA monitoring, they can be separated into two primary groups: high-level metrics, which deal with attributes relevant to end-users, and low-level metrics, which deal with attributes of the underlying technologies. Make sure that you’re specific when defining these terms.

What should I consider when selecting metrics for my SLA? 

When selecting metrics for SLA monitoring, the overall goal should be an equitable addition of best practices and requirements that will maintain service performance and avoid additional costs.

With that in mind, choose measurements that motivate the right behavior. Remember, any metric’s first goal is to encourage the appropriate behavior on behalf of both parties (the customer and the service provider). Each party must optimize its actions to meet the performance objectives defined by the metrics. After choosing your metric, test it by placing yourself in the shoes of the other party.

Ensure that metrics reflect factors within the service provider’s control. 
SLA metrics should have factors that are within the outsourcers’ control. This makes it easier to motivate the right behavior. Typical mistakes such as penalizing the service provider for delays caused by the customer’s lack of performance are avoided by making the SLA two-sided. This means measuring the customer’s performance on mutually dependent actions.

Choose measurements that are easily collected. 
If possible, the SLA metrics should be captured automatically, with minimal overhead. However, in cases where it’s not possible, choose the metric where easy collection is guaranteed; a manual collection of metrics takes plenty of time and effort, which may not yield results.

Set a proper baseline. 
The defined metrics must be reasonable and attainable. Over time, be prepared to revise and readjust the settings through a predefined process specified in the SLA. 

Less is more. 
Avoid selecting an excessive number of metrics. Why? An excessive number of metrics will produce a voluminous amount of data that will create more overhead costs and will take lots of time to analyze. On the other hand, avoid too few metrics since missing any one may mean the provider has breached the contract without it impacting the SLA.

Define with care. 
Make sure that the metrics are defined clearly to represent the intention of the service level. Clear definition helps avoid providers taking advantage of poorly defined SLA definitions. For instance, the Incident Response Time metric ensures that the provider addresses an incident within a minimum number of minutes. However, some providers may find a way around this by using automated replies to meet the SLA 100 percent of the time.

Also, make sure that the contract documents how the SLA monitoring will be performed. This includes detailing how the data will be captured and reported, who will review it and how it will be reviewed.

How often should we revise our SLAs?

As time goes by, businesses change, and so do their service requirements. SLAs should always be updated and revised periodically. To make sure revisions are not neglected, SLAs should include a clearly defined framework for modification during the contract term. Some of the main factors that should bring about a review include;

  • Changes in the customer’s business needs (e.g., more availability requirements if the customer establishes an e-commerce site).
  • Changes in the technical environment (e.g., Higher availability is made possible due to more reliable equipment).
  • Changes in the Workloads.
  • Improvements in metrics, as well as measurement tools and processes.

To sum it up

In this blog, you have learned what an SLA is, and the difference between an SLA and KPI. You have also learned how to design and verify an SLA. Above all, you have learned what kinds of metrics you should focus on during SLA monitoring. When choosing metrics for SLA monitoring always have both parties in mind. 

An SLA is a critical part of any supplier agreement. When laid out and defined correctly, it will pay dividends in the long-term. Server Level Agreements protect both parties and help them avoid disputes. It does this by using its clearly defined remedies that act as mediators between the two parties.

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Ceeview User Group Meeting, November 19th. 2020

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Due to Covid-19, this year’s meeting will be virtual.