From the course: Outsourcing Critical Success Factors
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Service levels and service penalties
From the course: Outsourcing Critical Success Factors
Service levels and service penalties
- The tool for defining the quality of service a client receives in outsourcing, is the service level agreement, or SLA. Non-performance penalties associated with the SLA are also critical. How the SLA and penalties are managed in an outsourcing agreement, significantly affects cost, the approaches used to deliver services, the flexibility of services the client receives, and actions taken when problems arise. Let's look at cost first. The stricter the service levels, and more severe the penalties, the more the outsourcer will charge. To meet strict levels of service, they'll require more staff, and more equipment or infrastructure. This is not to say a client shouldn't deploy strict service level requirements. It may be totally appropriate, and the outsourcer should respond in kind. Successful outsourcing agreements have service levels appropriate to the nature of the client's business. For example, it's a waste of…
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