Whether or not it's part of the BPO contract, an SLA has to be codified. It has to be an actual document. Conventional wisdom suggests that an SLA agreement should consist of five parts:

A description of what has to be provided—i.e., a service description.
The metrics that need to be accomplished.
Severity levels: It might clarify that a "Severity Level 1" incident is extremely serious and that failure to achieve the SLA in this area would have a substantial impact to the business. "Level 2" might be an incident that is significant but not serious. "Level 3" might be a breach of the service level that has a small impact, and "Level 4" might be negligible to the business. Sometimes this takes the form of a severity table inserted into the document.
A remedy if the SLA is missed; the extent of the remedy will depend on the SLA's severity level. For example, if a BPO provider has turnaround-time SLAs, and its outsourcing customer needs its daily A/R file at 8 p.m. in order to handle its daily postings, failing to meet the turnaround-time SLA would be very serious. What happens if the provider breaches the SLA and 100 percent of the A/R file isn't ready by 8 p.m.? Some companies include a penalty in the agreement. The penalty for the initial breach is usually a service credit per occurrence, but the SLA may impose more severe penalties if the same problem were to occur with a certain, specified frequency.
Incentives. Enlightened companies, if they're going to put consequences for breaches into their SLAs, will also include incentives to encourage their outsourcing providers to go above and beyond. Outsourcing customers need to seek ways to creatively balance rewards and penalties because a good partnership with a BPO provider offers intangible benefits. One approach is to give the BPO provider "credits" when it does particularly well for the client. Then, if the provider were ever to breach an SLA, it should have lots of cookies in the jar, so to speak.

Regardless of how SLAs are structured, their key role is to provide clarity to customers and outsourcing providers alike on what everyone should expect, in order to ensure that there's agreement up front about each organization's roles and responsibilities. In this way, an SLA facilitates a successful BPO relationship.

Instant Insights /

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