Managed IT Services

Service credits are a mechanism of allowing a customer to receive a credit if the supplier's performance does not meet the agreed standard of performance set out within a service level agreement.

For example, if the agreed response and remedy time is exceeded in the event of a software fault or downtime. 

The trigger for a service credit is generally set at such a level that both the customer and supplier agree that the performance is inadequate.

Service credits can be used as a sole remedy in the event of inadequate performance – in this instance, once the customer is granted the service credits, it shall have no further right for breach of contract against the supplier.

The mechanism for calculating both the value and the trigger events can be as simple or complex are the supplier and customer agree. For example, complex mechanisms provide or scale service credits dependent upon the severity of the failure.

Supplier-friendly terms can also include a "service credit holiday' – a period following the commencement of the agreement where service credits are not payable, given that this period ordinarily experiences the greatest number of faults and downtime. 

Benchmarking is a common process in a long-term supply of managed IT services and involves appointing an independent third party to carry out an assessment of the supplier's services and charges and compare this against the services and charges on the market to determine whether the supplier's offering remains competitive. 

If the supplier's offering is considered not competitive or good value, then this can trigger the obligation to revise the fees or service offering or an automatic price reduction. 

Benchmarking can be a useful tool for suppliers who can use the provisions as an incentive for securing customers into longer-term relationships. 

A service level agreement, or an SLA agreement, can be a separate, stand-alone agreement or be included within a contract for managed IT services (usually contained within a schedule).

The service level agreement will set out the agreed levels that the supplier is to provide the services and how the services are to be utilised, for example, by contacting the supplier through its IT help desk on specified numbers.

A service level agreement will ordinarily include faults deemed out-of-scope of the supplier's remit, for example, any faults caused by the customer.

A disaster recovery plan and a business-continuity plan are agreed schedules of action which may be incorporated into an IT-managed services contract, setting out the action to be taken by both customer and supplier in the event of a disruption to the service.

The purpose of a disaster recovery plan and a business continuity plan is:

• To prevent or minimise loss of data.
• To minimise disruption to, or preserve, the continued supply of the services to the customer or to ensure that the services return to normal as soon as possible.
• To minimise or prevent any impact on the service levels (if any).

A disaster recovery plan and a business continuity plan should be drafted in a way that is flexible for any changes that occur during the term of the contract, which was not envisaged or relevant at the outset.

An exit plan is an agreed schedule of cooperation and action on the part of the supplier and customer, setting out how a supplier shall exit from the agreement and transition the services back to the customer or a replacement supplier. 

If drafted and negotiated well, an exit plan should ensure that minimal disruption is caused to the customer when the transition occurs. 

The exit plan should set out all aspects of post-termination/expiry assistance that is required of the supplier, including what charges are payable to the supplier for such support.