Creating The Right SLA For Managed Services

A well-implemented service level agreement (SLA) is guaranteed to reduce staff
overload. Often in IT rather than doing things in a proactive fashion, we
solution providers go out and grab more clients without keeping the SLA at the
epicenter.

This is largely because most people do not realize what an SLA can truly do.
For starters if you plan your SLA well, you can reduce your staff workload,
especially if you opt for automated managed services. But the challenge is that
when you propose this, there are chances that your staff might resist it as they
feel they would be replaced, and so some solution providers drop the idea.

But they forget that an SLA can help them maintain their client base. Often
partners are caught in the mind frame that the breadth of a client portfolio is
more important than the depth. But that is not true. An automated managed
services offering can change this and improve your profitability and staff
retention.

Why opt for managed services?

Many solution providers shrug off offering stringent SLA or automating their
service deliverables thinking that they can get by. But this evolution is not an
option. It is mandatory.

In the US, around 20 percent of organizations rely on managed services. In
Australia this number is 15 percent while in India the number is less than 2
percent.

And this is the right time for partners to opt for automated infrastructure
management services because not too many people have gotten into it. It will
initially help you in differentiating your business and ultimately having the
top of the mind recall in this category.

So what is managed services? It can be defined as the 'proactive day to day
management of IT infrastructure to maintain the optimal performance for the
network for a fixed fee'. It is a situation where in the reactive world a
solution provider pays for a failure at their client end, with the ultimate
motive to gain client confidence and make money. This is because once you have a
fixed fee model then it is in your best interests if the client's system is
running at its best level with no downtime.

Listen to your clients

Don't you often feel you are on a treadmill, because you are paying your
service engineers for making several calls, but you are not getting anything
because they end up doing lots of jobs for free? This is where managed services
can come to your rescue.

Typically, a solution provider charges a monthly fee of say Rs 50,000 for a
specific number of work hours like 20 hours. An additional hour is offered at a
discounted rate of say Rs 2,000/hour. Work undertaken is recorded on a timed
basis and the billing is done after the work in completed. A typical maintenance
contract has no allowance for under/over usage of the months.

Usually, we do work for the client for an entire month. We don't tell the
client very clearly how much of it will be charged and for what period. And
then, when the client gets a bill, he is unhappy and we end up losing a client.
This is why maintenance contracts often end up being contentious issues. Either
you cut on your profits or you risk losing your client.

Clients want four key elements delivered in any SLA. The first is a fixed
cost. They want to know what they will be charged, for what nature of services
and for how long.

The second one is a guaranteed response time. If you tell them you will be
there as soon as possible, they might think it is in 5 minutes, you might think
it is 1 hour. Thirdly, they want someone from your team who knows their network
inside out.

All of these look like no-brainers till you decide to put them down in a
formulated plan and implement it.

A real life instance

Instead of getting frustrated about rising costs, manpower issues, upset
clients, it is time to look at the opportunities in the managed services
business. When I moved to this business, I was ridiculed. But today I am having
the last laugh as I charge more on an annual basis than I did on the break/fix
model. Till last year, I was waiting for a client failure and then sending
someone to resolve the problem. Not anymore.

I started Axxis Technology in 1989. In 2004, I had zero percent business
coming in from automated managed services. Today, more than 50 percent of our
income is from this stream. In 2009, 70 percent of my company's profit has been
from automated managed services.

Now with the help of automated managed services solutions, I can predict
failures and resolve them before the problem occurs, which keeps the client
happy. I, in turn, can plan how to utilize my man hours as well.

I have now realized what my clients want to see in any SLA. Firstly, they
want the SLA to come in slabs, so that they can choose the level they want to be
on the SLA and the price they would need to pay for it. They like this
arrangement because they are in control of what they want to be managed.

They also want to us to be proactive about the scheduled downtime. And most
importantly they want consultancy visits. Keep the client informed about new
things in IT which will benefit them but do not hard sell anything. Review
relationships and assess their needs. Just by talking about what is happening in
the IT world, people would buy it at a later date.

Be prepared for a lot of false positive starts. But remember, that just
because you have been doing something for a long time, does not mean it will
sustain you forever. What is profitable in your IT business today, could be the
path to ruin tomorrow. You have to be conscious to look for better way to do
things and analyze your business models.

As told to Vinita Bhatia at the SP CEO Conclave, Colombo

vinitavs@cybermedia.co.in