C E Web Systems

Service Level Agreements

What is a service level agreement?

A service level agreement (SLA) is a written agreement between a service provider and a client which specifies terms and conditions for technical support services. An SLA usually lasts for one year and may be renewed at the end of the agreement.

How can a service level agreement benefit my organization?

An SLA allows an organization to purchase specific services at a cost savings. For example:

An organization may see that they have a need for computer repair and support services, however this need may not justify hiring another employee.
An organization only needs periodic preventive maintenance on it’s out of warranty computer equipment.
An organization needs help installing new equipment.
An organization may need a customized computer program.
Guaranteed on-site response time

Purchasing an SLA allows your organization to acquire the technical resources (people, software, network, etc.) without having to hire new personnel. Service providers who offer service level agreements are highly skilled in the areas in which they provide services.

Cost Analysis

Generally speaking, an organization can save as much as 33% on labor costs by purchasing an SLA from their computer vendor. Let’s use the following example of a fictional company:

Acme Widget Inc. is a growing micro-business that makes specialized widgets for lobster boats. Acme is doing well however it is not in a position to hire a computer person full-time to service its computer network. Acme has eight computers in its office along with a DSL internet connection and a printer/fax/copier combo. Acme has decided that they have a need for eight hours of computer related services each month.

Acme has listed the following specific needs

Ensure that all of the company data is backed up regularly.
The internet connection is secure and functioning properly.
The printers are working properly.
The need to have someone available who can fix their problems within 24 hours because they can’t afford to have any down time.
The need to have someone open the computer cases and clean them out frequently because Widget manufacturing is a dirty business and dust builds up quickly.
The ability to provide professional training and consulting to persons who need to become proficient with Acme’s computer programs. Not everyone is computer literate or proficient with the computer programs that Acme uses. It would be nice to have someone on hand who is familiar with Acme and its computer programs to provide the necessary training.

Costs without an agreement

If Acme didn’t have a service level agreement, they would probably have to pay the standard rate for onsite technical support. This type of support is usually around $100 per hour.

Why so much money? It’s not as simple as getting into your vehicle and showing up at Acme’s front door. Research time needs to be spent learning the specifics of what is required for the work that needs done. Not only does the provider need to be skilled in the technology that they support, they need to be well versed in what it is that Acme does for business. If a service provider doesn’t take the time to learn about Acme and its business process they could do more damage than good. In most instances, this is non-billable time and therefore increases the overhead costs of doing this type of work.

Without an agreement Acme would spend about $9,600 each year for the 8 hours a month needed on support related costs.

Costs with an agreement

If Acme had a service level agreement with a provider, then they would have bought a block of support hours at a reduced rate. For example, if Acme bought an SLA for 100 hours at $65 per hour, they would have spent a total of $6,500. This would have been a savings of 35% off of the standard market rate.

What does Acme get for their money? By pre-paying for their hours the service provider can allocate resources specifically for Acme. Acme gets the special attention that they require by having a vendor who knows their business and business process.

Summary

A service level agreement is a viable option for organizations that have a need for a computer specialist but can’t afford to hire new employees. A service level agreement is a great way for an organization to save money by purchasing services at a reduced rate by agreeing to specific terms and conditions.