Presenting a live 90-minute webinar with interactive Q&A Drafting Service Level Agreements: Best Practices for Corporate and Technology Counsel Structuring Key Provisions, Anticipating Common Areas of Dispute, and Streamlining Negotiations TUES DAY, MARCH 4, 2014 1pm East ern | 12pm Cent ral | 11am Mount ain | 10am Pacific Today’s faculty features: Matthew A. Karlyn, Partner, Cooley , Boston Aaron K. Tantleff, Partner, Foley & Lardner , Chicago The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Drafting Service Level Agreements: Best Practices for Corporate and Technology Counsel Aaron K. Tantleff Matthew A. Karlyn Partner Partner Foley & Lardner, Chicago Cooley, Boston (312) 832-4367 (617) 937-2355 mkarlyn@cooley.com atantleff@foley.com
Why are Service Levels Important? Commitment from provider to provide the services to an agreed standard Incentivize provider performance Ensure customer pays for what it gets Cooperation between customer and provider Builds trust Service levels are a critical part of information technology agreements – invest the time and resources to negotiate appropriate service levels and corresponding remedies. 6
What is a Service Level? 1. Title 2. Description 3. Measurement Window 4. An agreed level of service Expected Service Level Minimum Service Level 5. Calculation 7
Service Level Agreement Structure Specific information related to Service Levels commonly located in exhibits to a master services agreement Reference in the master services agreement to the service level requirements in the exhibits – The MSA typically states that a provider will provide services – The SOW typically states what will be provided – The SLA typically states how the services will be provided Some service level-type requirements that are commonly found in the master services agreement and not in an exhibit: – Root cause analysis and resolution – Cost and efficiency reviews Warranties and other contractual terms are important but – Difficult to enforce – Damages are hard to prove / might be capped by limitation of liability 8
Service Level Agreement Structure Minimum Service Levels and Expected Service Levels Percentage of performance vs. actual number, for example: – 99% of responses within 1 hour – No more than 1 miss in each calendar month Key Performance Indicators vs. Critical Service Levels Services are described in a Statement of Work – SOWs must contain enough detail to ensure both parties know exactly what is to be provided 9
The Service Level Agreement General Requirements Definitions Provider Responsibilities Additions, Deletions and Modifications Service Level Failures Cooperation Measuring Tools Reporting Continuous Improvement Earnback Key Performance Indicators Critical Service Levels 10
General Requirements Objective and purpose of the service levels Commencement date Critical factors that may have an affect on the provider ’ s ability to provide the services in accordance with the service levels: – Materials, equipment provided by the customer – Customer ’ s failure to meet its requirements – Outside factors – Disasters 11
Disaster Exception to Service Levels except as set forth below in this Section 1.1, for a period not to exceed the first thirty (30) calendar days (the “ Initial Disaster Period ” ) following the declaration of a disaster, as described in the Disaster Recovery Plan, and while any affected Services are being provided by the disaster recovery services provider, Provider shall be excused from complying with the Service Levels that, as a result of the disaster, cannot be met through the exercise of best efforts; provided, however, that, (a) during the Initial Disaster Period Provider shall use its best efforts to comply with the Service Levels, and ensure that the disaster recovery services provider complies with the Service Levels, with respect to the affected services, (b) in no case shall Provider be excused from complying with the Service Levels that are not materially affected by the disaster, (c) in no case shall Provider be excused from complying with the Service Levels with respect to Services that continue to be provided by Provider in the same manner notwithstanding the disaster, (d) in no case shall Provider be excused from complying with the Service Levels that can otherwise be met through the exercise of best efforts, and (e) notwithstanding the foregoing or anything to the contrary contained in this Exhibit C (Service Level Agreement) or elsewhere in the Agreement, for any Availability Service Levels including D1.2, D1.4, D1.5, D2.2, D2.5 and D3.6, the minimum Service Level shall be reduced to ninety-eight percent (98%) and Provider shall, and shall ensure that Provider ’ s disaster recovery services provider shall, meet or exceed such ninety- eight percent (98%) Service Level during the Initial Disaster Period. 12
Definitions Define each term used in each service level Examples of terms to define: – Monthly Maximum At Risk Percentage: With respect to each calendar month, 18% of Provider ’ s fees for Services in such month – Critical Service Level: Those Service Levels that have a performance credits associated with service level failure – Key Performance Indicator: Those Service Levels that don ’ t have performance credits associated with service level failure – Earnback: The right of provider to earn back performance credits for Critical Service Level failures – Performance Credit Allocation Percentage: The total of the percentages (e.g., weights) of all Critical Service levels, which shall not exceed an agreed upon amount (e.g., 250%). • Minimums and maximums 13
Provider Responsibilities Initiating problem investigations Reporting service level failures promptly Reporting potential incidents and problems promptly Meeting service levels as quickly as possible after transition Reporting on root cause analyses and providing frequent updates Recommending improvements to ensure service levels are met 14
Customer Responsibilities Support the service delivery process Provide access to premises and personnel as necessary for the provider to provide the services Provide training as necessary 15
Additions, Deletions and Modifications Key Performance Indicators (KPI) vs. Critical Service Levels (CSL) KPIs – Additions and deletions of KPIs at customer ’ s discretion – Formula for service level metric to be determined by the parties For example, average applicable service measurement for the most recent 3 calendar months, or if no data, process for measuring performance – Modifications to KPIs on mutually agreed basis 16
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