SLA compliance risk and why you should care
Service level agreements (SLAs) are a staple of customer and service provider transactions. You may view them as a necessity, but not necessarily as a permanent tool in your utility belt. Others may understand the basic premise of SLAs, but have no idea how to manage the compliance risks along with them. This post is the first in a series on this very topic, and will walk you through the factors to consider on how to better manage such risk.
SLAs establish objective criteria for assessing the performance of business-to-business (B2B) processes and operations, such as order receipt, warehouse transfers, and claims processing. On the buy side of a business, service levels measure the performance of vendors who provide goods and services. Conversely, on the sell side, they measure how well a business complies with SLAs established by its customers.
Several aspects of performance are measured with SLAs, including:
- The accuracy and completeness of data exchanged between businesses
- The timeliness, responsiveness, and visibility of processes that manage data exchange
- How long it takes to provision new trading partners, transactions, and changes
- How available and dependable B2B infrastructure services are
Compliance with SLAs governing B2B integration performance is important to nearly all businesses. Business activities can be obstructed if they fail to comply. Such activities can include order filling, product shipment, and claim settlement. On the supply side of businesses, SLA compliance can make or break your vendor scoring and penalty determination by buyers. Unfortunately, poor performance can lead to lost business and reduced profitability for vendors.
The Right Infrastructure for the Job
SLA compliance depends on a variety of automated and manual processes. Both kids of processes depend on IT infrastructure that manages communication, automation, and integration between trading partners and enterprise systems. That infrastructure can be implemented using any combination of on-premise software, cloud services, or vendor-managed services.
The figure above shows the main infrastructure elements for B2B integration. In the center, middleware connects trading partners and external applications at the top with internal enterprise systems and data at the bottom of the illustration. On the left, design-time tools for provisioning integration processes are shown. And lastly, on the right, runtime tools enable monitoring, management, and reporting.
So what does all this mean?
How well a business manages its risk factors (as seen in the image above) will deeply affect its success. Whether B2B integration is managed in-house or is outsourced to a third party, accountability for compliance remains within the business. Due to this, make sure you verify that service provider’s policies and processes meet both business and trading partner requirements.
As discussed, service level agreements define expected results, but they don’t identify all possible ways to fail. Our next post will prepare you even further, as we will discuss the importance of controlling your data quality. Until then, feel free to comment below or download our “Service Level Agreements for B2B Integration: Managing Compliance Risks” whitepaper to learn more.