Work out details later? No! Now!

By Joe Auer

Suppliers often skillfully avoid tougher service-level guarantees by convincing the customer that service-level agreements (SLA) should be negotiated after a 90-day transition period. The supplier convincingly argued that service levels could be better determined once it understood the customer’s operations.

Suppliers suggest that the two sides work together to identify service levels during the transition. The customer many times falls for this, believing that information gathered during the transition period would produce more favorable SLAs. The customer signs a contract with no specific SLAs, no “out” clause if the two parties failed to agree on service levels and no recourse if the supplier failed to perform.

And guess what usually happens! At the end of the transition period, the supplier is willing to sign only a few weak SLAs with no remedies. For example, the supplier agrees to make applications “generally available” and that help desk calls would be answered “as soon as practical.” As you might suspect, the supplier escapes accountability with these “commitments” because no one could agree on what those terms really meant. As a result, the customer ends up with a multiyear contract that heavily favors the supplier.

To avoid this kind of mess, start with specific SLAs and remedies in your request for proposals. Let a qualified supplier perform due diligence of your operating environment under a nondisclosure clause as part of its preparation before making its proposal. A supplier’s bid should be based on your required SLAs, which should at least match the service you are currently receiving. In most cases, the SLA should exceed the current levels because you’re considering services provided by “experts.” The key is to specify desired service levels up front, early in the supplier evaluation process.

The critical error is signing a long-term contract without agreement on a fundamental issue – service quality. With a signed contract and no SLAs, a supplier won’t be motivated to guarantee exemplary service, only a minimal quality commitment that would leave the customer without meaningful recourse for unsatisfactory service.

JOE AUER is president of International Computer Negotiations, Inc. (www.dobetterdeals.com), a Winter Park, Fla., consultancy that educates Professionals on IT Procurement, Sourcing, and Vendor Management. ICN sponsors CAUCUS: The Association of Technology Procurement Professionals. Contact him at joea@dobetterdeals.com.

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