Creating service level agreements (SLAs) may not be the most exciting aspect of the role of a managed services provider (MSP), but it remains an absolutely essential part of the customer relationship.
When an SLA agreement is written correctly, it can help your MSP business ensure customer relationships are well managed and run smoothly. An MSP SLA agreement can improve customer perception of your company and minimize the number of disputes that arise. In a previous article, we put together a thorough guide for when you should and shouldn’t use an SLA, issues to address in an SLA, and ways to make your SLA measurable.
In this guide, we’ll expand upon the previous SLA article to provide a quick refresher definition of SLAs, emphasize why they are so important, outline some best practices around writing an MSP SLA, and give you insight into how to calculate SLA penalties.
What are SLAs?
An MSP SLA is a written agreement between the MSP and the customer. This agreement outlines the expectations that have been contractually agreed upon—for example, expected response times for service requests submitted by the customer. An SLA document is usually broken down into several categories based on the priority level of submitted support requests with a minimum response time and minimum time to resolution value.
As an example, a server outage that impacts key business operations might be considered a “priority one” issue. In this instance, the MSP might contractually agree to a minimum response time of one hour, and an expected resolution time within eight hours.
Why are SLAs important?
SLAs are not simply a list of rules that must be adhered to. They are a crucial part of helping protect your business, keeping customers satisfied by managing their expectations, and mitigating the potential for disputes. Here is a list of reasons why SLAs are so important for MSPs:
1. SLAS CLARIFY ACCOUNTABILITY
Setting an SLA helps you manage customer expectations and clarify accountability by giving your customers a clear outline of where your responsibilities begin and end. This helps prevent customers from holding you accountable for issues that are not your fault or are outside of your control.
2. SLAS ESTABLISH BOUNDARIES
As a provider of IT services, an MSP is likely to be responsible for the customer’s key hardware and software. However, there will inevitably be a number of systems that do not fall within your remit. This might include line-of-business applications with their own support contracts or print devices supported by a copier supplier. SLAs allow you to define what is and what is not your responsibility.
3. SLAS PROTECT YOUR TIME
When it comes to a customer relationship, there will always be individuals who have unrealistic expectations of you and demand more of your time than they are entitled to. An SLA agreement can help clarify which days and hours you have agreed to provide support so the personal time of MSP technicians can be safeguarded.
4. SLAS CAN HELP RESOLVE DISPUTES
Occasional disagreements are inevitable, but a thorough SLA can help you support your case. This advantage largely depends on how well you report on your response times and efforts to support requests. For example, if a customer complains without justification, you may be able to demonstrate that your company consistently responds to and resolves problems within the agreed SLA timeframes.
Best practices for writing SLAs
At its core, much of the success of your MSP depends on how well you fulfill the terms of your SLA agreement. This means that before you even enter the customer relationship, writing the SLA will partially determine how the relationship will go. To help ensure you’re writing the best possible SLAs, here are some basic best practices every SLA can benefit from:
1. ESTABLISH A CLEAR SERVICE DEFINITION
Your contract with each customer will vary. You may have control over some IT assets, but not others. Your SLA absolutely must specify which assets are covered by your support so there is no question of what you’re accountable for in the event of an issue. Be very specific and explicit when defining these assets and services with your customer to minimize the potential for loopholes.
2. SET CLEAR EXPECTATIONS AROUND REPORTING ISSUES
It is essential that your customers understand how exactly to best contact you if they have an issue. Your preferred mode of contact might be by phone, text, email, chat, or a ticket portal. Defining this for customers will help ensure nothing slips through the cracks—and that you’re able to track everything in a well-organized system. To avoid any confusion, customers should also be educated and made aware of the terminology used in the SLA, such as the difference between response time and time to resolution.
3. INCLUDE REALISTIC PERFORMANCE METRIC BENCHMARKS
Every SLA should include specific performance metrics, like device uptime and incident response times. These numbers are easy to explain to customers and give them a clear benchmark around what to expect from your service. Metrics should be realistic, easy to quantify, and relevant.
4. EDUCATE YOUR CUSTOMERS ABOUT MTBF/MTTF
MTBF/MTTF is a metric worth including in your MSP SLA agreement, but will likely require some explanation for your customers. MTBF/MTTF refers to the amount of time that has elapsed before an error occurs. If the system can be repaired, the metric is “mean time between failures” (MTBF). If the system cannot be salvaged, the metric is “mean time to failure” (MTTF). Including MTBF/MTTF metrics can help your customers understand how often they might expect issues to naturally crop up in a system—or how often they need to be replaced altogether.
5. WHILE YOU’RE AT IT, EDUCATE THEM ABOUT MTTR AS WELL
MTTR is another important metric to teach your customers. This metric refers to the “mean time to repair.” When a failure occurs, the aim is to get everything fixed in as short a time as possible. MTTR is the time that has elapsed between the outage and getting everything fixed. Ideally, this number should be as low as possible—the lower the number, the faster your MSP reaches a solution. Setting realistic expectations here can help prevent your customers from growing impatient while they wait for an issue to be resolved.
6. INCLUDE A CLAUSE FOR CUSTOMER COMPENSATION
When an SLA is violated in one way or another, there will have to be penalties. Having a clause in place for what to do in regard to any violations gives your customers the assurance that your company is trustworthy and can be held accountable. A good SLA usually includes a money-back guarantee—for example, certain violations might qualify for a 5% discount off the following month’s service fee.
7. THOROUGHLY OUTLINE CUSTOMER RESPONSIBILITIES AS WELL AS MSP RESPONSIBILITIES
A strong MSP SLA agreement will not only outline what an MSP is responsible for—it will also outline what responsibilities the customer should assume for their IT environments. This usually involves requiring them to follow certain practices and procedures sanctioned by you, as the steward of their data and networks. For instance, if a customer installs bad applications or engages in risky computer behaviors, they should be held accountable if these acts cause service disruptions.
How to calculate SLA penalties
SLA penalties will vary between contracts. When you’re drafting your SLA, your SLA penalty calculations should take the following parameters into consideration:
- Service availability: This involves factors like database availability, data center resources, and network uptime. Penalties should be used as a deterrent against service downtime, because downtime is likely to impact business productivity.
- Service quality: This refers to a performance guarantee, usually represented by the number of errors allowed in a service or product, process gaps, and other issues pertaining to quality of service. Many SLAs levy a penalty for every failure to meet these goals.
When calculating SLA penalties, consider the range of penalty types available to you. Here are the three most common SLA penalty types:
1. FINANCIAL PENALTIES
Financial penalties require the service provider to pay the customer damages, as agreed upon in the contract.
2. SERVICE CREDITS
Service credits require the service provider to reimburse the customer for the cost of the work that was done or offer credit for work to be done in the future. In this penalty type, actual funds are not transferred.
3. LICENSE EXTENSION OR SUPPORT
This involves the service provider extending the term of the license or offering additional support services to the customer at no extra charge.
It is key that penalties are set out in the language of the service contract, or they will not be enforceable.
Choosing a tool that facilitates SLA compliance
An MSP SLA is in place to protect both your business and your customer’s. It sets expectations, commits your services to maintain a certain level of quality, and helps mitigate the chances of disagreements occurring—which often end up resulting in customer dissatisfaction.
With the right MSP tool, you can save time on SLA reporting and improve your ability to meet SLAs, ultimately boosting customer satisfaction. SolarWinds® MSP Manager is a help desk solution designed specifically for MSPs that helps you resolve customer issues quickly and easily. This tool features intuitive and lightweight ticketing, allows you to batch billing exports to save time, and offers comprehensive customer and knowledge management capabilities. Its multiple reporting dashboards keep you organized and informed, meaning it’s easier to keep track of the various metrics you need to stay on top of your responsibilities as outlined in your SLA.
MSP Manager is also available as an advanced mobile application for convenience and work in the field. It is easy to use, dynamic, and features a branded customer portal for easy support requests. If you want to deliver a help desk solution that will impress your customers and help you meet and report on SLAs, look no further than SolarWinds MSP Manager. A 14-day free trial is available for MSPs interested in learning more.