Service Level Agreements: Structuring Performance Credits and Other Incentives

Description

The IT services environment evolves daily and drafting service level agreements (SLAs) presents unique challenges for counsel to customers, service providers, and vendors.

SLAs, at their most straightforward, address the current level of anticipated service. Well-drafted and effective SLAs also outline what happens when the unanticipated occurs, relationships break down, or the parties need to make additions, deletions and modifications to the service levels. Of central importance to these agreements are service levels and corresponding performance credits, as well as non-monetary incentives.

Individual service levels vary in their criticality and their associated remedies. Some service levels have associated pre-determined monetary remedies called performance credits, payable by the service provider to the buyer for missed service levels under the terms of the contract. Understanding the “math,” value of these performance credits, and the practical operational impacts can be critical to the success the service.

Listen as our authoritative panel of transactional attorneys provides guidance on structuring performance credits and other incentives in SLAs, including a detailed discussion of strategically using key calculation formulas and valuation provisions to minimize client risk.