Episode 18: Service Levels and Credits
- Embedded IT
- Nov 8, 2024
- 3 min read
Updated: Jan 16
This article is part of our IT Service Management (ITIL) series, exploring how organisations design, deliver, and improve IT services.
Designing effective service levels and credits in technology procurement
Service levels are often one of the most emotive parts of any technology procurement conversation. They define how a service will be measured, what good performance looks like, and how both sides stay aligned. Service levels are a practical application of ITIL service design and operation, helping organisations manage expectations and accountability.
Let's explore the practical considerations that go into designing service levels that work for both the business and the supplier.
Understanding what service levels are
Service levels act as the core metrics used to assess how well a service is performing. They should always be tied to the outcomes that matter most to the business. Keeping them simple is essential. Too many service levels can create unnecessary admin, slow down decision-making, and frustrate suppliers.
Focusing on the metrics that are genuinely important, such as availability or response times, helps keep everyone aligned. When the business has clear priorities, the service levels become far easier to design and manage.
Keeping the supplier involved
Service levels should not be created in isolation. Bringing the supplier into the conversation makes it easier to agree what is realistic, what tools and processes sit behind the measurements, and how the service will be monitored. This collaboration sets the foundation for a more positive long-term relationship.
Applying common sense criteria such as specific, measurable, achievable, relevant and time-bound helps ensure the final list is practical and trackable.
Using SLAs and KPIs effectively
Most people focus on service level agreements because they sit in contracts and often include service credits. But key performance indicators can be equally useful, even when they do not attract credits.
KPIs allow the business to measure specific aspects of performance for certain locations, user groups, or service areas. Mapping both SLAs and KPIs back to the broader service strategy creates a joined-up approach that supports meaningful service reviews and continuous improvement.
Monitoring, automation and reporting
Measurement only works when it is manageable. Automating the process helps prevent manual errors and reduces the overhead of maintaining spreadsheets.
Simple dashboards or status indicators make reporting easier and ensure performance is visible without complex analysis.
Designing fair credit and penalty regimes
Service credits are often where discussions get heated. A credit might be a fixed sum, a percentage of the service charge, or additional hours the supplier must provide. Whatever the structure, credits should relate directly to the service level being missed and should feel fair.
If penalties are too harsh, suppliers simply price in the risk, meaning the business pays more anyway. Fair, balanced credits encourage the right behaviour without turning the contract into an adversarial exercise. Incentives can also help suppliers improve performance by giving them something positive to work toward.
Building service levels that drive the right outcomes
Service level design is a specialist area, but the principles remain consistent. Keep the metrics simple, align them with business objectives, involve the supplier, automate the reporting where possible, and ensure service credits are fair. When those pieces come together, the service is far more likely to perform well.
For organisations looking to design fair, effective service levels and credit regimes, get in touch.
