Don't Spend Money Where You Don't Have To - Page 2

Sep 11, 2007

Mike Scheuerman


Now that you’re convinced to look at outsourcing, there are some essential elements of an outsourcing contract that you should look for before signing anything. These are typically addressed in the service level agreement (SLA) portion of the contract, but can be contained anywhere, as long as they are there and provide some enforcement mechanism.

An SLA has two major components, service levels and problem resolution procedures. In service levels there are two service level metrics that you want to address in order to protect yourself from some of the risk; they are uptime and response time.

Uptime refers to the amount of time a system is available for use. It’s calculated as a percentage of the total available time. Response time refers to the amount of time that it takes to get a problem resolved. Both of these are measurable items and any good outsourcing company will be able to give you their averages across their client base. If they can’t, move on to the next potential partner. Also realize that higher uptime percentages and lower response time numbers cost more, so be realistic about what you really need, want and can afford.

The second part of an SLA addresses how problems are resolved when things go wrong. It may be a critical problem where the system is totally down or just a minor inconvenience. In either case you’ll want to know what’s being done to fix the problem. You should have your partner provide you with a set of priority definitions as they apply to problems, i.e. What does critical mean? What is severe?, etc. Along with those definitions you should also get a resolution timeframe, who to contact to report a problem, how often you will be updated on progress toward a solution to the problem and who you can call if you need to escalate the problem.

One last caveat, don’t outsource and forget. You need to manage an outsourcing firm just like you would an employee. It’s an important part of your company and you don’t want to just let somebody else make all the decisions when they don’t sit in your seat.

Sure it’s a hassle to find the right company that will give you the service levels that you want and need to continue growing, but it’s worth the hassle and time to get the right partner to share the load with. And just maybe, you might save a couple of dollars at the same time.

Formerly with B2B CFO, Mike Sheuerman is now an independent consultant with more than 25 years experience in strategic business planning and implementation. He can be reached at

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