Service levels in outsourcing
Produced in partnership with Fieldfisher

The following TMT practice note produced in partnership with Fieldfisher provides comprehensive and up to date legal information covering:

  • Service levels in outsourcing
  • Types of service level
  • What to measure?
  • Cost and quality
  • Outcomes and outputs
  • Measuring service levels
  • Financial remedies
  • Other remedies
  • Earn back and performance bonuses
  • Agreeing the service levels post-signature

Service levels in outsourcing

The service level schedule is one of the most important in an outsourcing contract. It governs measurement of the supplier’s quality of service against specified standards to ensure adequate performance.

Should the supplier fail to meet the standards set by the service levels, a service credit mechanism is usually used to calculate a deduction from the charges. Other remedies, such as seeking resolution of the failure, may be at least as important to ensure long-term quality of service.

Defining service levels is a key part of contract negotiations. Failure to properly define service levels at the inception of a contract can leave a customer with inadequate recourse for poor quality services.

This Practice Note covers the following key issues:

  1. Types of service level

  2. What to measure?

  3. Cost and quality

  4. Outcomes and outputs

  5. Measuring service levels

  6. Financial remedies

  7. Other remedies

  8. Earn back and performance bonuses

  9. Agreeing the service levels post-signature

See also Precedent: Service level agreement.

Types of service level

Performance measures may include:

  1. availability—the proportion of time a service is available

  2. reliability—the number of incidents falling short of a required standard

  3. fix—the time taken to fix an incident

The measures chosen will be particular to the characteristics of the service, with hosting, data communications and hardware maintenance demanding very different service levels.

What to measure?

Not everything can be measured—nor should it be. Service descriptions in a contract contain

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