SERVICE PROVIDER: Commitment Matters

The service industry has gained a fair bit of momentum over the last five to
six years. With advancements in technology and the need to meet the increasing
demand for user satisfaction, the service industry has to be more precise and
efficient in meeting customer expectations.

Over a period of time, IT and telecom have become central to running
operations for an enterprise and its applications. Large number of corporates
today run mission-critical applications, where any kind of non-deliverable-be
it solutions or services-means loss of money, business, and customers. The
market dynamics today are such that to have an edge over your competition you
have to have high-quality services on offer.

With more and more service providers (SPs) getting into the market and
offering end-to-end solutions, the expectations and demands of the customers are
also increasing.

Business-risk Mitigation Tool

The end customers of enterprises have evolved to be extremely demanding.
Hence, service level agreements (SLA) from SPs are seen as a business-risk
mitigation tool in offering of mission-critical services by enterprises.

According to Sanjay Srivastava, head, business solutions group, Tata Indicom
Enterprise Business Unit (TIEBU), the enterprise business unit for the Tata
Indicom brand that services more than top 500 corporate customers in the
country, "SLA is a critical factor in terms of offering value-added and
managed services by SPs to its customers. As the market becomes more
competitive, SLAs are increasingly seen as a differentiator in the price-value
equation for the end customers. From an SPs perspective, SLAs-more importantly
delivering of the service in line with the committed SLAs-is becoming a
platform for customer expansion."

Ishwar Jha of Sony Music concurs that as technology dynamics and complexity
have increased and are now an integral part of business, SLA-from being just a
document to safeguard the conflicts-has evolved as the point of reference to
check, control and emphasize the greater usage of offering made by the SP.

Over a period of time there has been more awareness in the industry, and both
the SPs and the customers realize that services today are making the
quintessential difference to an organization and its business growth.

Muralidharan of NSE.IT that runs a highly critical business of operating the
national stock exchange of India (NSEIL) opines that the shift in focus for an
organization to lay emphasis on services rather than product has initiated the
requirement for SLAs.

Expectations

According to Deepak Verma of Reliance Infocomm, a leading SP offering
end-to-end telecom solutions to its corporate clients both domestic and
international, "A robust infrastructure and network plays a key role in
offering an efficient SLA." Quoting its own example, Deepak explained that
as Reliance did not have any legacy in its network infrastructure it was able to
set up a futuristic fiber network which enables the enterprises to offer
end-to-end services with SLAs integrated as a part of their service portfolio.
It is only because they have a robust reliable network that they can offer SLAs
to their customers and deliver them. He further added that this also enables
them to further customize these SLAs for their premium customers who have higher
requirements and expectations."

SLAs started getting defined for various customers/industries as per their
individual requirement. Organizations have started defining the service
expectation, which was required to sustain the business needs and aligning their
commitments to the client's requirements.

The Indian Scenario

SLAs are still in a primitive stage. A lot of work has been done in recent
years, but SLAs have to still gain stability and maturity. Very few SPs have
SLAs integrated into their service offerings.

Murali G of SBI life said, "SPs are not really ready to sign on an SLA
that will make them more accountable than they currently are. Even today,
clients rely more on relationships to make things work than on professional
performance metrics."

Though a healthy relationship with the SP is extremely essential it is also
important to extend it to a professional level.

Harcharan Singh of Hyatt Services India says that though the scenario is
changing, SPs are still reluctant to put penalty clauses in the SLA.

As SPs are becoming business enablers, than mere service providers, SLAs are
becoming an integral part of the systems and processes. SPs in India have become
sensitive to customer requirement and accordingly have been able to provide the
desired services based on SLAs.

Watch and Draft

SLAs form the basic document for defining the service standards of the company.
As such, it is very important to first understand the needs of the business and
identify the areas the SLA should cover. Utmost care should be taken to get rid
of ambiguities in defining the SLA parameters. A practical approach in defining
desirables versus the deliverables is very important. It is also important to
properly define the penalty clauses and levels of escalations, with action
points properly phrased.

As there are two parties involved, the customer obligation clause also plays
a very important role and has to be well defined.

Murali G of SBI life explained, "Performance metrics is key to drafting
a good SLA. But in an effort to have a watertight SLA, organizations run into a
problem of not being able to lay down the metrics correctly and completely. And
it is a key reason why SLAs fail to deliver on their promises."
Organizations are tempted to include too many metrics, believing that the more
measurements points it has the more control it will have over the service
provider's performance."

Performance should be evaluated based on attributes that can be clearly
measured and monitored, thus lesser the attributes better the SLA.

Well-documented and agreed-upon parameters for delivery measurement is
probably the single most important issue to be kept in mind while drafting SLAs.

Most often, SLAs fail due to an absence of clear measurement parameters.
Another important issue is a clearly written down procedure for claim mechanisms
in case of failure(s). Terms and conditions should be clearly listed without
using too much technical and legal jargon.

As any SLA is two sided, the objective is to ensure a successful and positive
working relationship between the SP and the client.

Continuous and smooth running of services delivery requires a smooth
interlock between enterprise customers and SPs. It is expected from the
enterprises that they would provide the necessary infrastructure for customer
premise equipments, so that service availability is uninterrupted.

TIEBU explained, "Service provisioning, as requested by user
organization from SPs, should be in line with the realistic end-user
applications. For example, an exact estimation of the bandwidth requirement
would ensure that the customer network is not choked during peak hours. In
addition, the user organizations are also expected to follow the escalation
matrices, provided by SPs, in case of need of problem resolutions."

SLAs Specific to the Industry

Broadly speaking, SLAs are decided by the SP for individual products and
services, based on the nature of product, customer needs, affordability, etc.
These are generic SLAs, which, now offered with the standard product offering.

According to Deepak of Reliance, there are generally three kinds of SLAs,
standard, premium, and customized.

Standard SLAs are offered by default, with all product offerings.

Premium is offered to clients who go in for the end-to-end solutions with a
little more attention to their specific requirements.

And the customized SLAs are for those clients who want a one-window shop for
all their requirements.

The industry has witnessed a paradigm shift in the business model, where
enterprises do not want to deal with too many vendors and SPs but rather pay may
be little extra to just one solution provider. As customers realize the value of
services offered, they are ready to pay more than the regular prices for that
extra-reliable service offered by the SP.

TIEBU concurred that the customization is primarily driven from the varied
needs of different industry segments. As an illustration, ITeS companies
typically require a very high SLA for international connectivity while a
manufacturing enterprise would require critical SLAs for domestic connectivity.

Different parameters are defined for SLAs for different products. For
example, a network connectivity service will need to back it up with SLA on
network availability, legacy, throughput, etc. Similarly, a data center
collocation will need SLAs on power availability, security access, air
conditioning, and the likes.

Adherence and After...

Drafting and negotiating an SLA does not complete the task, implementing and
reviewing the agreement on regular intervals is the most crucial part of any SLA.
One needs to have mechanisms to check and control whether the deliverables are
as per the decided norms and standards. As users are the ones who experience the
service efficiency, they need to communicate with the SP the features and
standards of service offering and ask them to notify if they do not get the
desired service. The customer needs to watch on the service offering and
regularly review the usability analysis, availability, etc.

Ishwar Jha of Sony music mentioned that they review the SLA adherence on a
quarterly basis and the life of contract as well as the SLA is kept for one year
only. Every new year they design and sign out new SLAs with a newer and more
practical approach, based on the learnings, industry standards, and newer
aspects that might have developed during the last year. He further added that
usually, resolving and drafting conflicting issues like uptime guarantee,
penalty clause, loss calculation, poison pill clause (incorporated if the vendor
chooses to merge with another company) takes more time. On an average it takes
10—15 days to get a final SLA.

"Reaching perfection in SLA management is both difficult and costly, but
can be managed through a carefully chosen set of 'simple-to-collect and
understand' metrics," says Murali G.

To conclude, as the quality of service and back-end infrastructure is
improving and private players are bringing in stiff competition without much
difference in the offerings. SLA is now given more importance. Also, due to
broken promises and failed cases, most organizations that have their
mission-critical business applications dependent on these services are insisting
on SLAs.

While more awareness been created in the industry, the service provider and
the customer-from the experience of peers and industry counterparts-are
taking a step ahead and taking a more professional approach to the delivery of
the expectations. What is being offered as premium and customized SLA today,
will soon become a default offering from the SPs as the market dynamics continue-competition
increases with higher customer expectations.

Minu Sirsalewala

A Typical sla

For Murlidahran of NSEIT, SLAs are specific to their requirements, keeping in
view the regular trend in the industry.

Their SLAs are defined to meet the requirement of the users spread across the
country.

To manage and maintain stock and spare for users.

To meet the turnaround time specified depending upon the nature of the
problem and the location of the user.

To adhere to the network up-time commitment and performance efficiency of the
system.

Murali G elucidated that every project is distinct from another in more than
one ways. Organizations should take into account the kind of project, and build
an appropriate SLA. It is important to realize that the metrics for measuring
performance of a project will be different from another project and while we try
and keep the basic structure of the SLA very tight and similar, there may be
some project-specific activities that may warrant specific metrics for
measurement and the same be built into the agreements.

Some industry-specific SLAs also deal in greater detail with security norms,
encryption, and IP protection. There is also, at times, an emphasis on
non-disclosure agreements (NDA) along with the SLA.

In Cases of Non-deliverables

Hyatt Services India uses Bharti's services. It recovered close to Rs 2.5
lakh as penalty from the SP. This was made possible and resolved timely as Hyatt
Services was bounded by a well-defined performance-penalty clause.

In the case of NSEIL, at a few of the members' location, preventive
maintenance could not be done due to limitations expressed by members. The
matter was discussed with all concerned and amicably resolved by agreeing to
complete the activity within the next cycle.

The matter did not require legal any approach as the limitations were agreed
upon by all concerned, and alternate actions were agreeable to all. NSEIL
adopted the partnership approach, rather than a vendor-customer relationship.