Service level agreement (SLAs) have always been a vital part of today’s digital enterprises. In addition to quantifying expectations in measurable terms, they focus on customer requirements and set clear and measurable standards of the vendor.
Recently, however, industry leaders began moving away from SLA-driven contracts as they believe they may not meet rapidly changing needs. According to them, SLAs do not go beyond managing IT services to managing customers’ experience of IT.
Why Service Level Agreements are No Longer Sufficient
Let us take a step back to SLAs to understand why enterprises began moving away from them. First off – What is an SLA? By definition, an SLA is:
“A documented agreement between a service provider and a customer that identifies both services required and the expected level of service.”
Usually, SLAs contain three sections for defining: a) the scope of agreement; b) the characteristics of the services; and c) the terms and conditions of the service provision and consumption.
Unfortunately, most comprehensive SLAs include gaps between consumers’ expectations and the final agreement because:
- Some of the needs and expectations are communicated by consumers
- Some of the requirements are discussed between the customer and the service provider
- Some of the discussed quality characteristics are documented in the agreement.
There are multiple reasons for these gaps, starting from miscommunication to intentional limiting. During the mass provision of services, especially for individual consumers such as home internet or private banking, negotiations are limited to the options in the service catalogue. Service consumers have little to no influence on SLAs beyond selecting from those options.
As a result, the agreed service level always differs from the expectations and needs the service aims to meet and fulfil. In fact, they tend to often be narrower in scope and lower in level.
Service level providers focus on meeting service levels stipulated in contracts. With time, however, their focus shifts to providing a minimum level of service at a minimum cost. As a result, IT organisations become commodities rather than strategic partners. This, in turn, prevents them from effectively contributing to business agility and pace.
The Watermelon Effect Due to SLAs
As tempting as the above image may seem, there is nothing desirable about the watermelon effect in service management.
The watermelon effect is described as:
“a situation where all targets are hit, and service level reports are ‘green’, while users and customers demonstrate ‘red’ levels of satisfaction.”
The watermelon effect is a risk which arises from an overly SLA-focused service desk. Red levels of satisfaction occur due to several reasons, including:
- SLAs being different from consumer expectations
- Targets met via underhanded means (e.g. closing incident records before target resolution time, then opening new records with the same information and continuing the work in a new timeframe)
- Not taking into account personal factors like culture, geography, and age when investigating users’ experience
- Not including user experience in SLAs which in turn prevent monitoring, measuring, or analysing it
To overcome this issue, SLAs should be amended to include user satisfaction targets. However, satisfaction rates can be adjusted artificially. Moreover, measuring satisfaction does not provide a better understanding of users’ experiences, or replace the measurement of service quality.
As a result, more enterprises began pivoting towards Experience Level Agreements (XLAs).
What are Experience Level Agreements (XLAs)?
By definition, Experience Level Agreements, or XLAs, are –
“A type of SLA designed to establish a common understanding of the quality levels that a customer will experience using the service in terms that are clear to the customer and to which he or she can relate.”
XLAs are a natural extension of SLAs in the Service Management domain. They aim at providing service consumers with a clear understanding of the experience they can expect when using the service. They also address the measurable characteristics of the user experience.
Moreover, XLAs can play a role in negotiating and managing service levels for end-user-facing services. This, however, would require an understanding of the dependencies between technical service level characteristics and user experience though. It may include user satisfaction with the overall service or specific aspects of the service as an experience characteristic.
XLAs are applicable to end-user services. For services addressing individual consumers, agreements can be described via the experience characteristics. Examples of this include internet and mobile network services. On the other hand, for services addressing corporate consumers, the agreement may include experience characteristics and technical characteristics for users and the IT team respectively. Examples include network services, printing services, and service applications.
Due to these reasons and more, XLAs are becoming increasingly popular among service providers. However, the ‘experience’ section in most cases is limited measuring user satisfaction with the service. It may also be further limited to the user satisfaction with service support. Though important, this data is insufficient for defining a new type of service agreement.
Another important consideration to keep in mind is that while XLAs are a form of SLA, the latter cannot transform into the former by simply adding satisfaction targets.
Delivering Value through Utility, Warranty and Customer Experience
ITIL 4 has significantly expanded on how to create service level agreement. Traditionally, ‘level’ in an SLA highlights the agreed service level targets for utility and warranty. However, ITIL 4 suggests service quality and service level should also include customer experience to become holistic and focused on value.
Let us look at the definitions of utility, warranty, and customer experience according to ITSM framework for a better understanding of all three.
Utility is the functionality offered by a product or service to meet a need. It basically defines what the service does, and can be used to determine whether a service is ‘fit for purpose’. To have utility, a service must either support the performance of the consumer or remove constraints from them. Many services do both.
Warranty is the assurance that a product or service will meet agreed requirements. It can be described as ‘how the service performs’. It can be used to determine whether a service is ‘fit for use’.
Warranty often relates to service levels aligned to the needs of service consumers. This may be based on a formal agreement, or it may be a marketing message or brand image.
Warranty typically addresses such areas as the availability of the service, its capacity, levels of security, and continuity. A service may be said to provide acceptable assurance, or ‘warranty’, if all defined and agreed conditions are met.
An important element of value is the experience that service consumers have when they interact with the service and the service provider. This is frequently called customer experience (CX).
Customer Experience (CX) is formally defined as:
“the entirety of the interactions a customer has with an organization and its products. This experience can determine how the customer feels about the organization and its products and services.”
The experience-based approach to service definition and measurement is applicable to services where service actions are an important part of the service (and may be the way to describe the service utility). In other words, it applies to services where users work with service interfaces.
Note that there are many services with no or few user interactions, including infrastructure as a service’ services.
From the perspective of experience management, a service action is the most important form of interaction. Examples of experience metrics include the number and frequency of:
- User errors
- Returns to the previous stage (back-button usage)
- Help (F1) calls
- Dropped (unfinished) service actions
- Users who switched to a different support channel during the support process
- Users who cancel a subscription after a trial period
- Users who confirm agreement with the terms and conditions without reading them.
How to Write Service Level Agreement in a More Effective Way
When defining a format for SLAs, service providers may benefit from the following actions:
- If services are for end-users, include user experience characteristics in the agreement.
- Agree on and measure the following user experience characteristics:
- Performance of user’s service actions
- Performance of user interfaces
- User satisfaction with overall services and specific service components or actions
- Correlate the performance of users’ service actions and user interfaces with measurable technical characteristics.
- Ensure data reliability (because user satisfaction metrics are easy to manipulate).
The Bottom Line
Modern ITSM recommends that service providers understand and manage service consumers’ experiences. This can be achieved by including experience characteristics in SLAs in one of three forms:
- Performance of user’s service actions
- Performance of user interfaces
- User satisfaction.
Finally, ITIL 4 advises practitioners to include experience in SLAs, along with the agreed service utility and warranty targets.