How to measure your SLA: 5 Metrics you should be Monitoring and Reporting

A well-written Service Level Agreement is an essential component of the client-service provider partnership, but how can you measure an SLA?

Confusion often swirls around the distinction between contractual SLA metrics and the broader range of key performance indicators (KPIs) that can also be used to track operations – and why both are essential.

Unfortunately, there is no “one-size-fits-all” set of metrics, and therefore how you measure an SLA will be dependent on the each organizations specific circumstances.

However, in this article, we will provide insight into helpful service level agreement indicators that organizations should consider while evaluating and negotiating vendor contracts.

• What is an SLA?
• What are the different types of SLA?
• How to Measure your SLAs: 5 Metrics you should be Monitoring and Reporting
• What should be considered when monitoring and reporting SLA metrics?
• How can the Service Levels be verified?
• What if agreed Service Levels are not met?

What is an SLA?

At its most basic, an SLA ensures that everybody is on the same page – protecting both the customer and the provider with mutually agreed-upon terms, protocols, and measurable metrics that enable everyone to meet standards and function productively.

The SLA specifies the types and levels of services that a service provider can offer organizations. It lays out the facilities and standards and covers the remedies and implications if service levels are not met.

What are the different types of SLA?

Traditionally, three different types of SLA.

Customer-based SLA – A customer-based SLA is customized for each client. This type of SLA is typically used when the customer only uses essential services that may vary from other customers, allowing the provider to keep it simple by using only one SLA.

A finance and human resource department, for example, may need the same umbrella service, but when it comes to the specifics, they may need a different level of service depending on their organizational and departmental needs.

A multi-level SLA enables a vendor to customize an SLA to meet the varying needs of a single complex organization.

How to Measure your SLAs: 5 Metrics you should be Monitoring and Reporting

The types of SLA metrics available will vary according to the services given.

While many metrics may be tracked to measure an SLA, you should aim to limit the number of metrics you measure to prevent misunderstanding and unnecessary costs on both sides.

To measure your SLA effectively, you should examine your operations to determine which metrics are most relevant and prioritize them accordingly. A good point to remember is that the more complicated the monitoring, the more time is required to analyze the data thoroughly, and the less likely it is to be accurate.

When in doubt, you should prioritize those metrics that are easy to collect. When measuring SLAs, automated systems are preferable, as an expensive manual metric collection is unlikely to be accurate.

Depending on the service, the following metrics can be monitored and measured:

1. Service availability – The length of time the service is available for use. This metric can be determined by time slot, with 99.5 per cent availability expected between 8 a.m. and 6 p.m., and more or less availability listed at other times. E-commerce operations are notorious for having highly aggressive SLAs at all times; 99.999 per cent uptime is not unusual for a platform that produces millions of dollars per hour.
2. Error rates – Error counts or percentages in significant deliverables. This category can include production failures such as incomplete backups and restores, coding errors/rework, and missed deadlines.
3. Technical quality – Technical quality is measured in outsourced application production using commercial research methods that analyze variables such as program size and coding defects.
4. Security – Application and network security breaches can be expensive in these highly controlled times. Measuring controllable security measures, including anti-virus updates and patching, is critical in demonstrating that all appropriate preventive measures were taken in an incident.
5. Service availability – The length of time the service is available for use. This metric can be determined by time slot, with 99.5 per cent availability expected between 8 a.m. and 6 p.m., and more or less availability listed at other times. E-commerce operations are notorious for having highly aggressive SLAs at all times; 99.999 per cent uptime is not unusual for a platform that produces millions of dollars per hour.
6. Error rates – Error counts or percentages in significant deliverables. This category can include production failures such as incomplete backups and restores, coding errors/rework, and missed deadlines.
7. Technical quality – Technical quality is measured in outsourced application production using commercial research methods that analyze variables such as program size and coding defects.
8. Security – Application and network security breaches can be expensive in these highly controlled times. Measuring controllable security measures, including anti-virus updates and patching, is critical in demonstrating that all appropriate preventive measures were taken in an incident.
9. Business results – Business process metrics should be included in their service level agreements (SLAs). Using existing main performance metrics is usually the best way, as long as the vendor’s contribution to such Key Performance Indicators (KPIs) is calculable.

What should be considered when monitoring and reporting SLA metrics?

When you measure your SLA, your should aim to incorporate good practices and standards to maintain service efficiency while avoiding unnecessary costs.

The following factors should be considered when you measure, monitor and report your SLA:

• Do the metrics encourage proper behavior? Every metric should inspire action by each party. Each side of the partnership will try to optimize its activities to achieve the metrics’ success objectives.
• Do the metrics represent factors under the service provider’s control? One common error is to penalize the service provider for delays caused by the client’s poor performance. For example, if the client offers change requirements for application code many weeks late, holding the service provider to a pre-specified delivery date is unreasonable and demotivating.
• Are the measurements simple to obtain? Balance the usefulness of a desired metric with its ease of selection. The SLA metrics should ideally be collected automatically, in the background, with minimal overhead, but this goal might not be achievable for all desired metrics. When in doubt, opt for simple collection; no one will put in the effort to collect metrics manually.
• Are there too many or too few metrics? Despite the desire to exert control over as many variables as possible, avoid selecting an overwhelming number of metrics or metrics that generate voluminous amounts of data that no one would have time to evaluate and build excessive overhead. Although less likely, having too few metrics is also a concern because missing any of them may mean the provider has broken the contract.

How can the Service Levels be verified?

To measure an SLA, the majority of service providers make statistics accessible, mainly via an online site. Customers should check to see if SLAs are being met and if they are eligible for service credits or other penalties specified in the SLA.

Typically, these procedures and methodologies are left to the outsourcing company to identify, ensuring that they will endorse the SLA agreement. However, it is recommended that the client and the outsourcing company collaborate during the SLA contract negotiation to avoid misunderstandings regarding the support process and procedures and management and monitoring methods.

Customers can, however, invest in third-party software to automatically collect SLA performance data, which provides an objective measure of performance for critical services.

What if agreed Service Levels are not met?

SLAs provide agreed-upon fines, known as service credits, that can be imposed if suppliers fail to meet minimum performance requirements.

When SLAs are not met, the provider and consumer agree to place a certain amount of monthly payments “at risk,” from which these credits are drawn. This strategy is meant to incentivize provider success without being too punitive.

Best-in-class organizations avoid using SLA provisions to punish their providers and instead use SLA metrics to open the door to fruitful discussions about success, goals, and the engagement’s or relationship’s future course.