Rethinking SLAs
Less Stick, More Carrot for Real Partnership
Throughout my years working with bid teams, I've noticed how easy it is for Service Level Agreements (SLAs) to become just another tick-box exercise. Questions like "Can we hit that uptime?" or "Is this response time achievable?" dominate discussions, but they rarely explore why these metrics genuinely matter to the customer. SLAs should reflect deeper conversations about risks, objectives, and what the client truly needs to safeguard their business.
Seeing SLAs Through the Customer's Eyes
Behind every SLA is a customer seeking reassurance. They aren’t chasing numbers for the sake of it—they're trying to reduce real risks. A bank might obsess over system availability because even brief downtime can disrupt millions of dollars in transactions. Similarly, a retailer worries about rapid incident response during holiday seasons because any delay directly impacts customer satisfaction and revenue.
When we genuinely listen to clients and understand these underlying concerns, SLAs shift from being burdensome obligations to meaningful targets aligned with business-critical risks.
Shifting from Punishment to Motivation
I've seen plenty of SLAs focused solely on penalties: if the vendor misses the target, they pay up. But penalties alone often create tension, causing friction rather than cooperation. In reality, no one wants to engage in constant finger-pointing or defensive posturing.
Recently, I've noticed a shift towards a more constructive model, blending incentives alongside penalties. It's a subtle change, but important. By rewarding vendors when they exceed expectations, businesses encourage proactive behaviour, investment in innovative solutions, and continuous improvement—benefiting everyone involved.
Fresh Ways to Reframe Traditional Penalties
One alternative that's been effective is offering service credits rather than pure financial penalties. These credits give vendors a tangible reason to step up performance without damaging the relationship financially.
Performance-based contracts are also gaining traction. They link vendor compensation directly to achieving agreed outcomes. When both parties’ goals align, collaboration naturally increases because everyone has skin in the game.
Then there's vested outsourcing—a genuine partnership approach that moves beyond transactional thinking. Here, success is shared, and the emphasis is on mutual goals and shared benefits. Both parties become invested in each other's success, creating deeper, more resilient relationships.
How to Create More Effective, Meaningful SLAs
From experience, I've found a few key approaches that significantly improve SLA effectiveness:
Involve both client and vendor teams in SLA development to build mutual buy-in.
Define clear, achievable, and measurable metrics, avoiding vague language or unrealistic targets.
Balance incentives and penalties, making sure both sides are genuinely motivated to exceed expectations.
Regularly revisit SLAs, adapting them to changing technology, business priorities, and lessons learned along the way.
Prioritise open, ongoing communication—addressing problems collaboratively rather than confrontationally.
In short, rethinking SLAs isn't about softening accountability. It's about turning them into genuinely useful tools that encourage partnership, innovation, and shared success. Done right, SLAs won't just protect the parties involved—they'll actively drive them towards mutual excellence.