8 Tips to Help

You Improve
Service Level Management
by Stuart Rance

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 What Is the Purpose of Service
Level Management?
The purpose of service level management (SLM) is to
understand and influence your customers’ expectations
about IT services, and to work with the rest of the IT
organization to make sure you deliver services that meet
these expectations. We document the customers’ agreed
expectations in a service level agreement (SLA). Meeting
the service levels documented in the SLA is not an end in
itself; the SLA is just a tool you can use to help you achieve
the real goal — meeting your customers’ expectations.

This seems straightforward enough, but all too often poor

service level management results in soured relationships
with customers. In the worst cases, poor outcomes may
include expensive legal wrangling as well as valuable
contracts being lost when they come up for renewal.

A Common Failing
Service level management is probably the most
commonly misunderstood IT service management
process. In my experience, many organizations act as
though SLM is all about managing SLAs. This can have
a very negative effect on their relationship with their
customers, which they fail to understand because all
the metrics show that they are achieving their targets.
If your customer is not happy but you are meeting your
targets, it is easy for you to feel exasperated because
your customer is being unreasonable, and for your
customer to feel angry because their concerns have
not been addressed. Relationships can easily turn
very sour indeed. This situation is often described as a
“Watermelon SLA,” because it looks green on the outside
but inside it’s all red.

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 Service Level Management Has Two
Cycles
Service level management has two quite distinct cycles of activity.

The first of these cycles can start when you are designing the service, but
should continue throughout the life of the service. This cycle consists of
three activities:

1. Understand. Start by making sure you understand your customers’

expectations. Make sure you can answer questions like: Why do they
want to use this service? How will the service create value for them?
What will be the impact on their business if the service is not working?
What service levels would they like you to deliver? What can they afford
to pay for the service?
2. Negotiate. Once you have understood the customers’ expectations,
you should compare these to your capabilities, and recognize whether
you are able to meet the expectations and what this would cost. Then
negotiate with the customer to find an optimal set of service level
targets.
3. Agree. At the end of the negotiation you should agree on a set of service
level targets, and document them. These are now your agreed service
levels, your SLA.

These three activities are shown as a cycle because you should not
stop after coming to an agreement. The customers’ requirements
may change as their business changes, or as the competition or
other environmental influences change. Your capabilities may
also change, making it possible for you to negotiate and agree on
improved service levels. There should be an ongoing process of
understanding, negotiating and agreeing on service levels.

The second cycle cannot start until the service is in use by the
customer. This cycle also consists of three activities:

1. Monitor. You need to constantly monitor the service to ensure it

is delivering what your customers expect. This monitoring should
enable you to track the status of all the service level targets that
you have documented and agreed upon with your customer.
2. Report. Create regular reports based on the data you collect
from the monitoring. These reports should be focussed on things
the customers care about. Of course the reports don’t need to be
long boring paper documents, you can use a constantly updated
dashboard, or any other communication tool that works well for
your customers.
3. Improve. Use the information you have collected and reported to
plan improvements to your services. Sometimes this step will
lead to a new understanding of customer requirements and
trigger the Understand-Negotiate-Agree loop described above.

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 As with the first cycle, this second one doesn’t end. You need to keep monitoring,
reporting and improving throughout the life of the service.

Here are some tips to help you improve how you do service level management. You
can make use of these tips whether you are an internal service provider, providing IT
services to other departments within your own organization, or an external service
provider, providing IT services to paying customers.

# 1 . Customer satisfaction is more

important than meeting numerical
targets
The very first SLM activity in the two cycles I described above is to
understand the customers’ expectations. When you speak to your
customers it is unlikely that they will explain what they want in terms
that are easy to measure. A typical customer expectation might be
that “Downtime of the service should not have a significant impact on
our business processes” or “Data should be protected so that we don’t
have any embarrassing security breaches.” You should capture these
customers’ expectations and include them in the
SLA.

You can then identify a small number of key

performance indicators (KPIs) that you can measure
for each of these expectations. For example, “Priority
1 incidents will be resolved within 2 hours” or “We will
achieve and maintain ISO/IEC 27001 certification.” Don’t
have too many of these KPIs, remember that the K
stands for Key. The idea is to measure, report, and trend
the most important things, not everything you could
possibly measure. If you have too many KPIs then they
won’t help to influence behaviour or decision making.

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 #2. Make sure that your numerical
targets are as SMART as possible
It is important to have measurable service level targets in your SLA. Ideally
every target should be SMART:

l Specific. A specific target is focussed on a clearly identified situation

that you want to understand. For example “How quickly do we resolve
incidents? or “How many transactions do we process each minute?”
l Measurable. A measurable target has a clearly quantified value that you
are able to measure. This doesn’t always mean that the target has to be
numerical. For example, a target could be “We will achieve and maintain
certification against the ISO/IEC 27001 security standard." This may have a
simple yes/no measure.
l Achievable. An achievable target is something that you should be able to
meet, within the constraints and resources that you have.
l Relevant. A relevant target is one where achieving the target is closely
linked to the underlying goal or purpose. For example, “Resolving priority
1 incidents within 2 hours” may help to demonstrate that you are meeting
the real goal of protecting a business process from the impact of IT failures.
l Time-bound. A time-bound target has defined times and durations over
which it is measured. For example, “Measured over a three month period
and reported at the end of every month."

SMART targets enable us to clearly and unambiguously report our

achievements, and to understand and report trends. Unfortunately, as I have
already said, the things our customers want are often difficult to express
as SMART targets, and so the wrong type of focus on these SMART targets
can result in the situation I described above as a “watermelon SLA," where a
service provider meets all of their targets while completely failing to satisfy
their customers.

When you report to your customer, you should include the measured values
from the SMART targets, but you should talk about the actual customer
expectation and experience. For example, you might say something like “Your
expectation was that downtime of the service would not have a significant
impact on your business process. There were two priority 1 incidents this
quarter and both were resolved within the agreed 2-hour time. Do you agree
that we met your expectations? This gives the customer an opportunity to
either agree with you, or to help you understand why the SMART target was
not right, so that you can re-negotiate the service levels.

The important thing to remember is that the SMART targets will never
completely capture the customer’s underlying expectations. That is what the
service level manager is for.

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 #3. Keep SLAs short and simple
An SLA should be easy for both you and your customer to read and
understand. It should also be easy to modify if the targets are not working
either for you or for the customer.

Long and complex SLAs are common when there is a contractual

relationship between the service provider and their customer.
This situation can be made even worse when the KPIs in the
SLA are used to manage financial rewards and penalties.
Service providers are encouraged to focus on meeting the
numeric targets, regardless of whether this is in the customer’s
interest; and customers tend to become confrontational and
suspicious instead of facilitating the service provider’s efforts to
help them. On one occasion I saw a service provider tell service desk agents
to ignore priority 2 incidents and focus on priority 3 incidents, because
the target for priority 2 incidents was safe but there was a risk of missing
the target for priority 3. This behaviour worked as intended, at least in the
short term, as there was no financial penalty that month, but the customer
found out about it and was very angry. SLAs that include financial rewards
and penalties encourage a confrontational and dysfunctional relationship
between the service provider and their customer. Avoid using these wherever
possible.

I have seen SLAs that include 30 or more separate documents, some of

which were hundreds of pages long. I really don’t understand how an SLA
like this can be used to help manage customer expectations. My advice
would be to separate the SLA from the contract for delivery of the service.
The contract should have contractual terms and conditions; the SLA should
be referenced from this contract but should not be part of it. This way you
can modify the SLA (by agreement) when you need to, and you can use it to
help you focus on delivering services that meet your customers’ expectations.
I do understand the need for legal language in a contract to supply services,
but I am not convinced that we need to embed the SLA within this legal
document.

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 #4. Make sure your KPIs are customer facing
SLAs should focus on customer expectations and customer-facing KPIs, not
internal IT-centric ones. For example, an SLA should not include KPIs like
“Number of incidents per service desk agent” or “Average time to find root cause
of a problem." These are internal KPIs that may be important to a service provider
but they are not relevant to the customer. Customer-facing KPIs in an SLA should
include things like “Number of incidents not resolved within agreed times” or
“Business impact of top 5 problems” — measures like these are directly relevant
to how well the IT organization is helping the customer meet their business goals.

#5. Use generic service levels whenever these

are appropriate for your customers
All the advice I have seen on service level management says that you should
understand what your customers want and then negotiate and agree service
levels. In fact, the Understand-Negotiate-Agree cycle that I described above
repeats this advice.

In practice it can be difficult and expensive to deliver individually customized

service levels for every customer, and very few service providers do this. The
most cost-effective approach to take is to understand what the majority of your
customers are likely to want, in general terms, and then design your services and
your infrastructure to be able to deliver this. Where possible you should design
each service so that it can deliver a range of different service levels: for example,
you might offer three different levels of availability or performance based on
using different infrastructure to host the service, or you might offer two different
response times for incident handling.

If you have standard packages that you can offer your customers, then the
negotiation and agreement are greatly simplified, because you just need to
explain your various options to the customer and help them to decide which
option is the best fit for their needs.

Sometimes a customer will have a real need for a service level that is
different to your standard offerings. You should avoid telling them
that they have to take a standard service offering that doesn’t
meet their need. You should put some real effort into
understanding what the customer needs, and then working
out what it would take for you to meet that need. Designing
a custom solution for the customer is likely to be much more
expensive than if they had chosen a standard service offer,
but if you are straightforward with the customer about the
cost of negotiating a custom service level, then this will allow
them to make a choice based on what they can afford and
what their real needs are.

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 #6. Reports should be forward looking;
don’t just report what has happened
An essential part of service level management is creating regular
reports for your customers. Typically, these are created every month
and delivered to the customer by a service level manager in a face-
to-face meeting, but details like this obviously depend on the exact
relationships you have with your customers.

The service level reports you create for your customers should include
information about your KPIs. However, it is not sufficient to just report
the measured results for the KPI. Your reporting must help your
customer to understand how the measurement and reporting of this
KPI will influence how you deliver service to them. For each KPI you
should include information about:

l The value of the KPI for the reporting period. For example: “Average
time to resolve P2 incidents was 4.1 hours.”
l Whether any thresholds were exceeded. For example: “This was
outside the agreed KPI threshold of 4 hours.”
l The trend for the KPI. For example: “This is slightly better than last
month and is a significant improvement on the figures from the
previous three months.”
l Any changes or improvements that you plan to make to improve
the service based on this KPI. For example: “The improvements we
have already put in place are continuing to improve the time it takes
to resolve incidents, and we expect further improvements as we
continue to populate the new knowledge base. This KPI will almost
certainly return to acceptable values from next month.”

Obviously you use the data from your monitoring to inform your
customer about what has happened, but the most important use of
the report is to show your customer that you understand why this
happened and inform them about what you are planning for the
future. You should also think about providing your customer with
a dashboard to allow them to have real-time monitoring of KPIs
that are especially important to them.

Your service level reporting should be as much about the

future as it is about the past.

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 #7. Plan improvements, even if you are
meeting all your service level targets
Some IT organizations think that if they are meeting all their KPIs then
there is no need to make improvements. They effectively collapse
the second SLM cycle from Monitor-Report-Improve to just Monitor-
Report. I’ve heard two different arguments in support of this approach:

l We are already meeting the customers’ expectations, and if we

improve the service this could set a new level of expectation that we
will now have to continue meeting.
l We are an external service provider and if we improve the service
without additional charges then this will discourage the customer
from purchasing higher levels of service.

I think that both of these arguments are wrong, because they

ignore what is happening around you. Other organizations are
making improvements all the time. Your choice is not whether to
make improvements or stay where you are. It is whether to make
improvements or gradually fall further and further behind your
competition, until you become irrelevant.

Some organizations might think that they are exempt from this
because they have no competition, but this is never true. For example:

l If you are an internal service provider and your customer has no

choice other than to use your services, I can almost guarantee
that the most senior management in your organization will have
reviewed the possible cost and benefits of outsourcing. If you’re still
delivering services at the cost and quality that you were 10 years ago
then the argument for outsourcing will be irrefutable.
l If you are an external service provider and your customer is tied to
a long term contract, then you still need to keep improving your
service if you wish to maintain your competitive edge and your
reputation. Customers that are not satisfied with your services are
less likely to purchase additional services from you. Furthermore,
these existing customers invariably talk to other potential customers
about the services they receive, and if they are dissatisfied this will
have a huge impact on your ability to win new customers.

So even if you regularly meet every KPI in your service level agreement,
you should still deliver regular reports to your customers showing how
you plan to improve. Maybe the improvement will simply be to change
the KPI targets to make them a little more challenging, or maybe you
will plan real improvements in the underlying service. Ideally you will
offer a combination of both.

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 #8. You can agree on SLAs, even if the
customer doesn’t trust them
I have worked with a few organizations where the IT department was
unable to put SLAs in place because the customer had had a previous
bad experience, and thought that an SLA was simply a tool for the IT
department to hide behind. The typical customer comment was “we want
the service to be available all the time, we’re not prepared to negotiate a
lower level of availability so you can have an excuse when it fails."

In one case that I came across, the IT department did the best they could
for a customer like this, but failure to understand the customer’s real IT
needs through the process of negotiating and agreeing on a detailed
SLA resulted in the catastrophic failure of a major business project after
the organization had spent $20M over a 12-month period. The customer
wanted the service to be “available all the time," and so their IT organization
implemented high availability technology. The design meant that the
service might stall for between 10 seconds and 2 minutes when there was
a hardware failure. This would be a reasonable and perfectly adequate
interpretation of “available all the time” for most customers under most
circumstances. Unfortunately, what this customer actually needed was
for no failure to last longer than 300 milliseconds. If the project had been
allowed to continue, then the first time there was a hardware failure —
even though the incident would last no more than a couple of minutes —
the business impact would have been disastrous.

Customers like this can be a huge problem for the service provider, because
they are effectively denying their responsibility for understanding their own
needs and for setting the trade-off between cost and service levels.

An approach that has succeeded with a number of my clients is to

acknowledge the customer’s concern and to avoid using the term
SLA. You could, for example, go to your customer and explain that
you are planning to make improvements to the service, and you will
measure and report two or three things to show how effective the
improvements are. Then ask the customer what they think you should
measure. One organization where I recommended this has gradually
increased the number of things they measure and report, without
ever introducing SLAs. The service level manager is now in a position
to really understand and influence customer expectations, and work
with the rest of the IT organization to make sure IT services meet these
expectations — which is the reason for wanting an SLA in the first place.

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 Summary
The tips in this paper are intended to help you improve how you carry out service level
management. If you focus on the two cycles, Understand-Negotiate-Agree and Monitor-Report-
Improve, and follow these tips, then you will do a great job of aligning your services to the needs
of your customers:

#1. Customer satisfaction is more important than #2. Make sure that your numerical targets are as
meeting numerical targets SMART as possible

Never lose focus on the really important thing: SMART targets are specific, measurable, achievable,
understanding, influencing and meeting your relevant, and time-bound.
customers’ expectations.

#3. Keep SLAs short and simple #4. Make sure your KPIs are customer facing

Make sure your SLAs are short and easy for you KPIs should be focussed on the things that matter to
and your customer to understand and to change your customer – the customer facing outcomes of the
if necessary. Avoid SLAs that include penalties and services you deliver.
rewards; if these are required, try to keep them in
a contract away from the SLA you use to help you
manage customer expectations.

#5. Use generic service levels whenever these are #6. Reports should be forward looking, don’t just
appropriate for your customers report what has happened

It’s much more efficient, and cost-effective, to offer Remember that the purpose of reporting is to help
a small number of generic service levels to all your you understand, influence, and meet customer
customers. If a customer really needs something expectations. Don’t just report what happened but
different, then you should make sure they understand make sure the customer understands trends. Tell the
the full cost of providing an exceptional set of service customer how you plan to improve and what service
levels. levels they can expect in the future.

#7. Plan improvements, even if you are meeting all #8. You can agree on SLAs, even if the customer
your service level targets doesn’t trust them

Service improvement isn’t an optional extra. The The SLA is not an end in itself, if the customer doesn’t
alternative to improvement is not staying still — it is want to use SLAs then you can still understand,
gradually becoming irrelevant. Even if you are meeting negotiate, and agree on the service you will deliver, and
all your agreed service level targets you should still be then monitor, report, and improve.
planning how to improve the service, and reporting
these planned improvements to your customers.

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 If you follow these tips then you will deliver services that meet your customers’
expectations. This will result in increased customer satisfaction and reduced
customer complaints — surely that’s a goal worth a bit of effort on your part.

Are you interested in more ITSM tips and guidance?

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About Stuart Rance

Stuart is a consultant, trainer and author, and is an expert in ITSM
and information security management. He was an author for ITIL 4,
ITIL Practitioner, RESILIA™: Cyber Resilience Best Practice, and ITIL
Service Transition. Stuart is an examiner for RESILIA and ITIL, and
teaches these as well as CISSP and many other topics. Stuart also
provides consulting to organizations of all sizes, and in many different
countries, helping them use ideas from IT service management and
information security management to increase the value they create
for themselves and their customers.

Toll Free US: 1-800-686-7047

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