Rothstein Associates Inc.

HOW TO PREPARE SERVICE LEVEL AGREEMENTS (SLAs) FOR APPLICATION
SERVICE PROVISIONING (ASP)
By Management Advisory Services Consulting Staff

“The increasingly rapid pace of change in new information technologies and the need reduce
implementation time is driving the need to capitalize on ready and available knowledge from
third-parties and opt for outsourcing of applications, applications hosting and networking
capabilities. This new field is referred to as Application Service Provisioning (ASP). This
presents quite a challenge in the selection, procurement and contracting of ASPs and
requires sound guidelines for preparing quality Service Level Agreements (SLAs).

“In addition to providing background information, this manual presents a general plan of
action for approaching outsourcing and ASP provisioning and a detailed checklist. The
practical information provided derives from decades of experience in formulating service
agreements on Information Technologies and in the course of consulting and training
assignments.

“Whether you are a CIO, IT manager, technology assessment team leader, legal counsel,
auditor, legal counselor, contract officer, consultant, or a user manager interested in
ensuring
that sound procurement best practices are employed in outsourcing IT services, especially
on
Internet applications, you will benefit for this unique manual. The questionnaire in fact reflects
a set of best practices to achieve effective service outsourced contracts.”

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“Increasing competition, dynamic changes in the market place brought about by customer
expectations and requirements, and the need for a quick response to satisfy clients' needs
has brought about many changes in the way organizations develop and/or acquire
applications software.

“This has created the need to go outside the boundaries of the organization and to acquire
ready-made applications and even outsource the new technology applications software and
service processing package to so-called Application Services Providers (ASPs).
Accordingly, there is a great need to have a thorough guideline and checklist of all the
considerations that ought to be considered when outsourcing applications and services and
when preparing Service Level Agreements, considering that the latter can make or break the
success of the outsourcing program.

“This eminently practical guide addresses the needs of executives, IT managers and CIOs,
software managers, administrators, risk managers, procurement division and legal
departments to develop sound and effective SLAs. The SLAs should consider all the critical
factors that software procurement can bring and minimize the traps that can occur when
negotiating, licensing and outsourcing Applications Service Provisioning.

“The manual will also materially assist operational auditors, I/S auditors, and contract or
program reviewers in preparing audit plans and scrutinizing the soundness of service level
agreements and outsourcing programs.
“By giving special consideration to the key elements provided in this practitioner's manual,
the busy executive, I/T and other professionals will save a great deal or time in developing
the
criteria to consider in preparing and negotiating sound service level agreements and
outsourcing specifications.

“In addition, by preparing sound SLAs you will help to minimize the potential risks of entering
into inadequate or flawed service contracts for applications software, operational processing
and network services outsourcing.

“It is our earnest desire that the material contained in this manual help the reader arrive at
better outsourcing, better SLAs, improved procurement practices and meaningful audits that
truly respond to the key issues involved in technology ASP services outsourcing and SLA
preparation.

- From the Preface,
How to Prepare Service Level Agreements (SLAs) for Application Service Provisioning
(ASP)

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CONTENTS

PREFACE

1. THE TREND TOWARDS ASP
1.1 The Advent of Application Service Provisioning (ASP)
1.2 Factors That Drive The Move To ASP
1.3 The ASP Paradigm
1.4 Service Level Agreements (SLAs)
1.5 Key Objective of the Manual
1.6 A Basis to Prepare The Legal Document But Not A Substitute For IT
1.7 The ASP Paradigm and Outsourcing - Differences
1.8 Applicability of The Guidelines

2. THREATS AND RISKS IN APPLICATION PROVISIONING AND OUTSOURCING
2.1 Purpose of This Section
2.2 Threats As Generators of Potential Problems In Application Provisioning
2.3 Classes of Risks
2.4 A Compilation of Potential Outsourcing Threats and Risks
3.5 Summary

3. A DISCIPLINED APPROACH TO DEVELOP SOUND SERVICE LEVEL
AGREEMENTS
3.1 Purpose of This Section
3.2 Key Elements and Success Factors In Arriving at Sound SLAs
3.3 Benefits of Investing Time and Effort In Preparing Sound SLAs

4. A PLAN OF ACTION AND GUIDELINES FOR PREPARING EFFECTIVE SLAs
4.1 Purpose of This Section
4.2 A Plan of Action For of Software And IT Services Outsourcing
4.3 Overall Process and Plan of Action For Outsourcing and Procuring IT Services

5. A COMPREHENSIVE CHECKLIST FOR PREPARING SLAs
5.1 Purpose of This Section
5.2 A List of Key Factors to Consider in SLA Preparation
5.3 Detailed Checklist to Assist In Structuring SLAs
5.4 How to Use the Checklists

APPENDIX

REFERENCES

TERMINOLOGY

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