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Service Level Agreements

Service Level Agreements
  Technology with Integrity

By Tim Torian, Torian Group, Inc.


Whether you hire someone with computer skills, or contract for services, or simply replace things when they break, you are paying to support your IT tools.  The purpose of this article is to help you understand how to get more for your investment.

IT – Information Technology exists to help your business. Every business has tools which it has purchased for the purpose of improving profitability. Like any tool, computers and related devices require maintenance and support to continue producing the business results they are intended for. You invest twice – once to purchase the tools, and again to make sure they are as productive as possible with IT support and maintenance. If you have a company IT staff or person, you may also invest in tools to maintain the tools.

Every business must make choices about where to invest. How do you know whether to invest in IT maintenance, or how much and for what?  The best way to make these decisions is to tie them back to the business purpose of the tools, and attempt to determine how important the business process the tools support is to the overall goals of the business.  If you have an electronic order entry system, and it stops, you stop taking orders. The process of taking orders is supported by the computers, wires, software, and people that keep the order entry system working. 

By tying particular business equipment to the processes it supports, you can calculate the cost of down time.  If it costs $10 per minute that you stop taking orders in lost revenue, and you can determine that the order entry system has gone down on average for 3 hours per month in the last year, it has cost you 3 x 60 minutes x $10 = $1800 per month.  If you can spend $500 per month to get the down time reduced to 1 hour, it is a good investment.

If you have a way to manually take orders, and it keeps you from losing the orders during the down time, and it only costs $100 per month extra to maintain, and another $100 in extra time to reenter orders, the manual system is a better investment.

Determining which equipment supports which business process is not always simple. More often than not, computers perform many functions. In some cases they make it possible to do things that you would not otherwise attempt. For example, if it takes a computer 1 hour to apply a formula to stock market data which you use to make a buy or sell decision daily, and the same work would take 3 days without the computer, the data would be useless by the time it was created.

The relationship between the value of a business process and the cost of keeping equipment at a certain level of reliability is called a service level.  In order to accurately determine the desired service level, you have to gather information about the impact of equipment failures or outages, and then determine the likelihood of the failure.

If your sales people use cars to drive to prospects, you can determine the Service Level you want to maintain for your cars.  First, you need to know the cost of a missed appointment. Then you need to know how often cars break down on average, and how likely the breakdown is to cause a lost appointment. Then you can set a value on working cars, as it impacts the business process of being at sales calls. This is then compared to various ways of preventing car trouble, and/or mitigating the impact.  This allows you to set a “service level” for maintaining working cars. Perhaps you decide that it is never ok to miss a sales call, because each call could result in over $10,000 in lost revenue. Your “service level” is no missed appointments.

At this point you can get creative about how to achieve this.  If you determine that cars fail about once a year, you could reduce that to once every 3 years with improved preventative maintenance. You could equip every sales person with a car with a motorcycle attached, so that they can always make their appointments. You could keep a spare car and driver available. You could invest in more reliable cars. Each alternative has a measurable cost which you can compare to the benefit.

Without determining a service level, you have no rational way of making decisions on equipment support investments.  To arrive at the acceptable level of reliability, you need to know the relationship between your business processes and the equipment, and gather historical data on failure rates or down time. You need to know the cost to the business when each business process is impacted by down time. Then you need can evaluate the cost of options to raise reliability to a particular level.

Whether you are dealing with an internal or external support system for your equipment, you can use service levels to work together to get the optimum value for the investment in support.  By focusing on service levels – the business result of the maintenance process, rather than particular maintenance functions, you effectively pass responsibility and accountability to the maintenance department or service company.  They have the freedom to find more efficient ways to maintain a level of reliability for a business process, and you don’t have to understand every detail of their methods.  By assigning rewards and consequences for meeting a service level agreement, you can effectively manage your IT investment. IT companies or departments that are willing to measure their level of service demonstrate their confidence in the service they provide.

Tim Torian teaches computer networking at the College of Sequoias. He has a BS in Computer Science, and has been consulting on computer networks for the past 15 Years. His industry certifications include: Cisco CCNA and CCNI, Microsoft MCSE, and Novell CNE.  He is president of Torian Group, Inc. which provides a full range of Technology Consulting services to local business, including computer services, networking, and custom software development. They can be reached at (559) 733-1940 or on the web at http://www.toriangroup.com


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