How can you handle SLA disputes with service providers?

Few important points to be established before the SLA discussion. Define service level Definition ( SLD ). SLD is logically and tangibly defines outcomes. It is data-driven service availability parameters that can be measured and recorded so that whenever there is discussions it is based on data, not on emotion. Service Level Definition should be based line using the past six months' application performance data. It should include application parameters and features from the user's perspective so that SLA can be defined for the actual availability of services and aligned with customer experience. Post-defining SLD it should be measured for all possible conditions so that SLA achievements become measurable for all possible outcome.

I've found it helpful to evaluate the dispute, first. What is the dispute about. What caused it? What part of the operating model and process contributed to it? What was the bi-lateral business impact to the party(ies)? Answering these questions can help frame options moving forward, as well as corrective actions, instrumentation, and management systems that others have already shared.

There's a fundamental misunderstanding of what an SLA is. "A service level agreement (SLA) is a contract that defines the expectations and obligations of both parties in terms of service delivery and measurement." Wrong. An SLA, by definition, is NOT a contract. It is an AGREEMENT. SLAs are established between a service provider and customers which are part of the same legal entity. The service provider agrees to provide services at mutually agreed levels. No lawyer is involved and it's ludicrous to put penalties in SLAs. Contracts are established between two separate legal entities and are legally enforceable. Terms are contractually binding so, maybe, get your lawyers involved. To avoid confusion, call it what it is: A CONTRACT!

You can define anything on paper and a seasoned delivery manager can show you how he delivered on-target against those definitions. This is referred to as the SLA watermelon effect: on paper everything is green, inside operations clients are red faced by irritation. Therefore, the first thing is not to look at the SLA, but to relate the dispute to negative business impact. Dispute discussions should be first and foremost about business impact and business priorities, not about service definitions. When there is clarity about the desired business impact, you can redefine roles, processes (at both sides), targets and responsibilities accordingly.

Hopefully the SLA as per the contract is well defined and unambiguous, so at least you have a clear baseline in which to conduct the conversation, however even if clear contractually, it’s good to exercise pragmatism as hopefully you are both in the relationship for the long-term.

Most problems in the professional world can be avoided through proactive communication. If you are dealing with a professionally managed service provider, it is safe to assume they are equally invested in resolving the situation. The typical process for resolving issues involves providing constructive feedback, conducting a Root Cause Analysis, identifying the true underlying reasons, implementing reinforcement procedures, consistently measuring and governing the process, and ultimately achieving a status quo upon successful completion of a Performance Improvement Plan (PIP).

Collaboration and Clarity: The SLA fosters a collaborative environment by requiring both parties to be clear about their roles, responsibilities, and expectations. Adaptability and Escalation: The document provides for adaptability in service requirements and an escalation process, which is critical for addressing unforeseen challenges and maintaining service quality. Audit and Compliance: Regular audits and compliance checks are essential for maintaining trust and ensuring that the services provided meet the agreed standards.

Can’t agree more , proactive communication and clear cut reporting of the SLAs and seeking improvement plan for the breach is extremely important to handle disputes . Every SLA should have a minimum target level set and incase if the SLA is not achieved then clear expectations to be set with the vendors and penalize for not meeting expectation.

Communicate constructively. Unless the relationship is broken, approaching partners in a constructive rather than punitive manner positions for an open dialog necessary to resolve any potential dispute. Recognize that root cause analysis will evolve, revealing new information over time. Do not box yourself in too early with a narrative until the facts are known.

When disputes arise because of continuous lack of quality/performance, the solution is simple. Say goodbye to the provider. But in my experience, disputes often arise out of a difference of opinion. In many cases this is, because service providers are unable to assess the complete client context upfront. This means that often clients assume that something is included in the service without the service provider knowing that it is relevant. But some aspects might be so client specific that they only become apparent after signing the contract. When this is the case, have transparant discussions about what is expected and what the new insights mean in terms of cost levels and price.

Effective monitoring and reporting are crucial in managing SLA disputes. This involves using agreed-upon methods like dashboards and audits for accurate data collection and analysis. Regularly reporting deviations and requesting corrective actions ensures compliance. Suppliers must authorize client audits and document KPI calculations for transparency, aiding in identifying and resolving service issues efficiently

In my time in operational provider management I have experienced that your only chance is to - have clear and crisp KPIs - that are measurable - implemented in your ITSM system - have reports generated by the system Once you run into doubts as to the measuremet method, the numbers or its interpretation you will be lost. It is then crucial to review the service together with the provider in time. Be prepared to analyze the trends and to find explanations and improvements for breaches. Make sure to have reports available for your stakeholders in the retained IT. It is still their accountability, so make them aware of what is happening.

Dashboard are created and regular reports shared but very often they are seriously looked into when it’s too late. Proactive communication and regular reviews are must. It’s important to share/get the key information/issues behind the myriad of SLAs. This can be achieved only by going beyond the written communication.

Most of the issues on SLA are because of variance in accepted method of measuring and baseline of measurement not defined and agreed .. This needs to be fixed in beginning

Don’t let it become an official dispute. Work on it with the service providers account Manager and business/ technology teams to resolve the issues. Divide issues in to multiple small ones and tackle them one at a time to resolution. Any differences in measurement can be discussed and a common ground or baseline arrived at. Most importantly learning’s should get added in next periodic review and SLA update.

Always negotiate. Depending on the business impact, you may be able to get something even more valuable than the penalty dollars. Many times I have been able to get reinvestment back to critical projects at 2x-3x the rate of the SLA penalty dollars. These can be a real win-win if done properly. Lastly, if you're managing your budget by penalty dollars, you have bigger problems.

Negotiations and compromise these two words carry a great an impact on organizational life cycle . Negotiations in pricing , convincing and understanding is highly acceptable whereas compromise in quality and services will not be acceptable. Hence as a service oriented - Customer centric services provider organizations needs to be carefully in evaluating the negotiation deals and compromising deals

I'm afraid I have to disagree here, sure you can negotiate SLA disputes and breaches, but never compromise. That's not flexibility that's lack of true governance and ITSM reporting in my opinion.

If the provider is a Strategic Partner negotiate. Review the past, if It has occured more in the past then you need to sit down wih the Provider and find out why this is happening. Talking about the issue will add more more insight and even there could be chance for new ideas. Keep in mind your goals and objectives. If it happens again then you need to shift focus to this issue and have detailed SLA reviews with the Provider and find a resolution. If there is a Service Credit option consider to use it. Avoid lowering SLA-s at any costs, this will generate disputes at your end of the business.

Escalation is a pretty powerful mechanism and shouldn't be seen as someting negative per se. An escalation occurs when managers on the same level at both sides cannot come to an agreement. A best practice is to escalate together to the next echelon within both organisations. Make sure that managers on both sides receive the same data and information and hear from both sides. As a European I do believe that the only winners of litigation are the lawyers involved. Knowing their hourly rates is the best incentive to keep any disputes short.

In my experience, litigation is the consequence of several factors such as (a) incomplete, innacurate, unrealistic or lacking SLAs in a bid specification; (b) incomplete or poor service quality checking with providers' clients. In having to face a litigation, you might benefit of from some strategies: (1) avoid having a mere technical discussion on the SLAs gaps, but try to focus on the roadmap to improve them; (2) have sr. level executives from both sides participating in the discussions, and align with them on the importance of a long lasting relationship; (3) be reasonable. The blame is not always on the provider; (4) Bring concrete cases of poor SLAs and try to analyze what went wrong - you may find process errors.

Root cause analysis (RCA) must be conducted in a transparent penalty-free environment. Assignment of any SLA should be a secondary action. While outsourcing partners must be held accountable, they are staffed by individuals who experience the same anxieties and biases as your internal staff. Governance needs to be transparent and credible to be effective. Don't hold your team to a different standard than the outsource partner. Define an annual process for review and reset of any SLAs that no long represent your business priorities.

You need to give business sense a chance. This means you need to openly and transparently discuss with the vendor the differing views between you and them as to the deviations from expectations and back them up with concrete examples and evidence. Where a rational approch leads the vendor to become unreasonable (usually a sign they interpret your professionalism for weakness), you need to protect your interests fully and with the necessary measures. At the end of the day, nobody wins from a protracted dispute, and if trust is destroyed the adverse ramifications for both sides are huge. Strongly advice therefore, keep it transparent, professional and non-personal, but be ready to stand your ground and pursue your business interests

I've found that the timescale between "sales lead" and "go live" means the world has moved on somewhat within the Client's environment / personnel. In addition, Clients often sweat assets during that time, making any "transformation" programmes underpriced/scoped. This ^ can lead to material differences between what was sold and what's possible. A mature supplier would recommend real due-diligence/ rebaseline as a condition of the contract prior to go-live. (And all parties should build-in quality time to accommodate). Often the pressure to go-live overwhelms any DD timelines, and guess what.. we find ourselves in dispute territory ... weeelll before the joint teams have scheduled their first round of golf! Bosh.

Two things that will go a long way in ensuring there are no disputes in SLAs once defined. 1. To review and agree on the method of measurement of each SLA at the time of signing the contract. This includes the different steps in the calculation and the parameters that are used in the calculation. This should also factor in how performance during outages are accounted for. 2. To agree on the source of input data for calculating the SLA which should ideally be common for the vendor and customer.