If an SLA has been thoughtfully and carefully designed, there is very little scope for a service provider to incur losses, says Vinay Deshmukh, Executive Director & CEO, FFServices, where 60% of the contracts are SLA-based. But it is critical for everyone to understand and agree on the scope of the SLA; at present, the industry is going through a transition phase where customers are not yet used to putting all their demands on paper.
Let us assume that a contract requires 100 personnel to be deployed, but on certain days, only 90 are available. There are two options: either the available staff work overtime and are paid for it, or the supervisor finds a way to improve the efficiency of the 90 people and still deliver. The first option is expensive; the second requires efficiency to be improved for just one day, without incurring additional costs.
Say a contract begins with 100 personnel and 20 machines; if it’s an SLA, we can increase the number of machines to 25, and reduce the number of personnel required to 80. This creates a differential, which we offer to the customer; 50% of the benefit is theirs, and 50% is ours. Everybody wins.
Every proposal has a commercial component and a resource component. Keeping the commercial part aside, we need to first identify the resources that are going to go in. For this, you need a proper understanding of what you’re supposed to deliver, which leads to a scope sign-off. Without the latter, you cannot understand the resource allocation that needs to be done, and without that, there cannot be a proper proposal.
Just to illustrate how the clarity of scope matters, we would like to quote a real-life example: We used to have a customer whose scope of work in the contract included dining area cleaning. We were on board with this, since we know that the dining area needs to be cleaned after every service, and deep cleaning has to be done at night.
However, as we began, we realised that the customers’ requirements and the expectations they had written into the contract were entirely different. The customer said that at their facility, clearing plates and refilling water at the table were considered a part of the dining area cleaning. Now this required at least 20% more staff effectively shooting the costs up by another 20% - taking us back to the drawing board.
While drawing up SLAs, it is always better to be very transparent, and at the same time, ask the customer for a commitment to what they are signing off on; we should offer our commitment in return.
Some customers just say that each and every aspect of housekeeping at their facility is our responsibility, and leave it at that. This approach has outlived its existence; today, it cannot find much traction.
Imagine a manufacturing facility with 20-minute time slots for workers to come and have food. Under the SLA, you have understood that you have to serve around 2,500 meals within two hours. Since the facility is in the North, the consumption of rotis is high. A roti-making machine is the best solution, and our survey shows it is working well. But at some point, we were told that machine-made rotis were not acceptable.
A roti-making machine can roll out at least 1,000 rotis per hour; for the same output, at least 8 persons will have to be employed. In such instances, costs can go for a toss.
If you are taking over a site from another service provider, it is very important to understand precisely how services were provided, regardless of what was in the previous contract. The age of the equipment also matters. As a part of hard services, it is very essential to understand the life and status of each piece of equipment. Ageing demands more attention to their upkeep and breakdowns. We have learnt from such experiences to draw up better and more accurate SLAs.
SLAs are always dependent on the number of facility users. For example, whether there are 100 persons or 10 persons in an office on a given day, and whether one operator is available or three, the indoor temperature needs to be maintained within the same pre-defined range.
That’s the beauty of SLAs. They give you the freedom to operate and set you free from the boring but momentous tasks of monitoring every ratio. Instead, we concentrate on the measurable and work towards achieving that.
Let’s assume that your SLA for cleaning a particular area states that this needs to be done twice a day, at 8 am and 12 pm. But now, there is a requirement for cleaning every three hours, which affects the resources needed. If you have an SLA-based contract, you’ve done the costing for cleaning the cabin twice a day, and are charging ‘x’ for a month. That can easily convert to 4x for cleaning eight times a day, or x/2 for doing it once a day. If disinfection is also required, it can become x + y. These figures can be negotiated during the term of the SLA.