Service-level agreements (SLAs) and key performance indicators (KPIs) are vital for excellent telecom expense management. But what exactly is the purpose of SLAs in telecom expense management? Why are they important? And, how do KPIs contribute? We answer these questions and more, to get to the bottom of this important subject.
What are SLAs?
SLAs are agreements between customers and vendors that outline the level of service the vendor must deliver. Basically, an SLA is a business tool that sets expectations at the start of a partner relationship, and is written into a contract to ensure good terms of service.
SLAs clearly define responsibilities, metrics, and expectations, so if any problems occur, or agreements are breached, whoever’s responsible can be held accountable. As contractual agreements, it’s important that both parties take these seriously. Setting expectations upfront allows you and your vendor to start your relationship on solid ground, knowing exactly what you can expect from each other.
An SLA will typically include:
- Details of the services needed
- The metrics to be used for measuring their success
- A summary of the responsibilities of each party
- Any penalties to be imposed for breach of terms
What are KPIs?
KPIs are the metrics that customers and service providers agree upon to measure how well the vendor is doing. These are objective measurements that highlight where your provider might be underperforming. A good KPI must be straightforward, realistic, and easy to measure.
KPIs can be defined as “… the critical (key) quantifiable indicators of progress towards an intended result”.
These are the metrics that appear in monthly and quarterly reports and act as an early warning system that alerts you and your vendor to any danger that an SLA might be under threat. By monitoring KPIs proactively, you can keep on top of SLAs.
This can sometimes get confusing, as there may be an initial overlap between KPIs and SLAs. This arises as KPIs can start out as SLAs. When you begin a business partnership, first you define the crucial SLAs, and then you define the KPIs that help measure how well your vendor will meet expectations.
Josh Paine, Technical Sales Consultant at Cass, sums up the relationship between SLAs and KPIs succinctly:
"SLAs are making sure things don’t fail, KPIs are making sure they succeed."
Why are SLAs and KPIs Important?
In the world of telecom expense management and beyond, SLAs and KPIs ensure that the level of service supplied meets expectations, as outlined in your customer-vendor contracts. They set boundaries, clarify measurement guidelines, and ensure that both the customer and the vendor agree on the terms of contractual standards and service.
However, the use of SLAs and KPIs is not as common as you might think. In fact, you may be surprised by how infrequently organizations use them. A survey conducted into the use of SLAs and KPIs for key business relationships found that over one-third of vendor-client relationships don’t have any formal agreement in place for measuring performance, while about 22% of respondents weren’t sure if they had any SLAs or KPIs in place. It was concluded that only 40% of those surveyed were actively using metrics to set expectations, SLAs, or measure performance, with KPIs.
What Should SLAs and KPIs Cover and Avoid?
If you want to set effective SLAs in your telecom expense management contracts, these should cover two main areas – management and services. With regard to management, your SLAs should include:
- Definitions of measurement standards
- Reporting processes and frequency
- Dispute resolution procedures
- Clauses to protect you in the event of a service-level breach
With reference to services, they need to include:
- Details of services provided and availability
- Responsibilities of each party
- Escalation procedures
- Costs
Your SLAs should also be as clear as possible, to avoid misunderstandings, and avoid vague, unmeasurable goals. As service requirements and provider capabilities may change, you should always ensure your SLAs are kept up to date.
In addition, whether you’re negotiating an SLA in a new contract, or reporting KPIs, you need to ensure that you define meaningful metrics that you want to track. It’s important to avoid so-called ‘vanity metrics’, which serve only to show how much data you have. KPIs, as the name suggests, should only indicate key information about performance, and ideally offer some insight as to how that performance might be improved.
What Do SLAs and KPIs Mean for Telecom Expense Management?
SLAs and KPIs ensure that you get a high level of service from your telecom expense management provider, as they hold people accountable by setting clear roles and responsibilities.
Carefully constructed SLAs in telecom expense management are crucial. If your service provider’s SLAs aren’t working in your best interests, you could be missing out on the support you need, valuable cost-savings, and the high-quality service you require.
To get the most from your telecom expense management vendor, you must make sure that your SLAs work for you. Your contract therefore needs to include performance-based SLAs and the agreed performance metrics should align with your provider’s internal targets. In this way, the vendor will be actively incentivized to help you meet your targets.
In fact, Gartner previously highlighted that sourcing managers need to ensure that their telecom expense management contracts include detailed performance-based SLAs, which can be missing from contracts with less established vendors.
Build Stronger Relationships
Measuring performance on mutually dependent actions is a good way to build strong working relationships. At Cass, we fully understand that for SLAs to work well for you, they need to be two-sided, so your success is tied to our success. We align your goals to our targets and help you to achieve these throughout the term of your contract.
Topics: TEM
