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Actionable Insights - The New Service Level Agreement between Service Providers and Clients

Today, many service level agreements are focused on transactional measurements, which can stifle relationships, keep business services from evolving, and negatively impact customer experiences. Like so many other things in this digital world, traditional SLAs are being called to evolve. Shifting their focus from transactional measurements toward value creation through actionable insights will have big benefits for both clients and providers.

It’s about adding value

Traditionally, SLAs have focused service provider efforts on areas where the client feels there is greatest risk. For years, those risks have been defined as get it right and get it done on time.

But with the digital evolution of the last 20 years, these are no longer the risks. Of course providers still need to pay attention to getting it right and getting it done on time, but the greatest risk service providers face today is the risk of not adding value. Value is what clients expect when they sign the contract — and the ability to deliver value lies squarely in a provider’s ability to maximize the data they are processing by leveraging digital technology and services to ultimately drive the best possible customer experiences.

Good data helps uncover insights, devise new strategies to create and strengthen relationships, and know more about the market and customers than competitors — all durable competitive advantages for businesses today.

When we, clients and service providers alike, over-emphasize narrow transactional performance, we miss opportunities to grow and innovate together, at a hidden (but very real) cost. Excellence in execution should be expected from any services company. The question clients need to ask is, how will you add value?

Moving past “the nines issue”

This over-emphasis on transactional measurement originated in the IT outsourcing world –– and there’s a term for it: the nines issue. This refers to the drive to constantly improve IT system availability beyond 99% uptime, and the fight to add more nines behind the decimal point. “Five-nines,” or 99.999%, is a common benchmark in this field and a common SLA requirement.

In IT, uptime is important, and in general business service relationships, accuracy and reliability are important. But it’s become increasingly clear that there’s so much more to the client relationship.

In surveys, business leaders are acknowledging that their needs are more nuanced than current SLAs often reflect. For instance, one study of cloud computing SLAs found that four of the 11 attributes significantly impacting business adoption (that is, whether the deal between client and provider was actually made) were non-technical in nature. In a further sign that some SLAs are focusing on the wrong things, the study also found that another 10 common attributes in SLAs had no significant impact on deal-making at all.

From transaction-focused to insight-focused digital interactions

It’s time to start treating transactional execution like the block-and-tackle infrastructure it is, not the prize. The prize, which both client and service provider should be focused on in their relationship, is insight, and the opportunities that are waiting to be discovered from every digital interaction, customer touch point, and deep data dive.

This is the burgeoning new norm for SLAs: clients and service providers entering into their relationship to create digitally driven efficiencies, provide better customer service and grow business.

With this new norm, service providers will be rewarded (and held accountable) for delivering value to their clients on a foundation of service excellence. To be most effective in this digital age, it’s paramount that providers deliver digital expertise and strategically partner with their clients to produce repeatable insight-driven business value.

Clients looking past the nines to find ways to foster value-creating relationships with their service providers will inject competitive advantage into each new SLA.

Read more about the shifts in business process services and stay current with our experts on the Conduent blog.