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Understand How Your Service Level Agreements Operate and Uncover Hidden Overspends

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Understand How Your Service Level Agreements Operate and Uncover Hidden Overspends

Posted by Reza Koranki on May 21, 2019 1:35:32 AM
Reza Koranki
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What if you could go into your company’s storeroom, open a few dusty boxes and find money hidden inside?

You would do it, right?

Especially when OPEX budgets are running out, and departments are scrambling to fulfill goals that require funding.


The truth is that many companies are overspending when it comes to their Service Level Agreements and it is taking a toll on budgets. As your IT presence grows, there is an inherent level of inefficiency in support coverage

Uncovering and correcting these inefficiencies can have a significant impact on budgets. In fact, most users could cut their current OPEX by at least 20 percent without changing vendors or service levels.

How do you know if you fall into this group?

  1. You have a service agreement with an OEM on more than thirty devices.
  2. You currently have service agreements on equipment that was purchased and deployed within the last seven to ten years.
  3. You have multiple service agreements on equipment that is less than ten years old
Typically, CIOs have a high-level understanding of their cost base, but lack transparency at a granular level.”CHARLES MCLELLAN

How Does This Happen?

Companies often purchase hardware from OEM partners. Cisco, Juniper, Brocade, and Citrix, each have partners in the field selling products and most sales are channeled through these partners. The challenge comes in understanding the service that is included in these new purchases. Manufacturers often fail to educate their partners on the services to which new customers are entitled.

As a result, these partners are ill-prepared when it comes to sharing entitled service information with their customers; leading to the purchase of additional Service Level Agreements (SLA) to cover perceived support gaps.


Companies often purchase SLAs to protect during times of crisis. When a piece of hardware goes down, getting it back online is the primary objective. Down hardware costs money and an SLA can mitigate those hits.

However, SLAs are expensive, complex, and difficult to navigate. The issue is further complicated as new hardware agreements and equipment join the business’ infrastructure.

Only 20 to 25 percent of clients actively use [purchased] service level agreements.” CHARLES MCLELLAN

Understanding Service Level Agreements

The protection provided by SLAs fall into four key areas:

  1. Software support
  2. Technical support
  3. Hardware support
  4. Field engineering

Software support includes access to updates, remote troubleshooting, installation assistance, and basic usability assistance for specific software products. This level of support focuses on the end-users of the software and maintaining the daily flow of business.

However, this support rarely covers upgrades, which generally fall into the “software maintenance” category and are available at a separate fee.

Technical support is a helping hand for your internal IT department. If your administrator runs into a problem, a technical support agreement provides access to experts to assist your team in navigating downtime and infrastructure changes.

Hardware support provides parts replacement when a piece of equipment goes down. The varying levels of hardware support correspond to replacement time needs and vary from four hours to several days.

Field engineering brings the experts to your door. This is the highest (and most expensive level of support). Field engineers are deployed to install replacement hardware and ensure that physical equipment is connected correctly.

It is important to realize that these four areas of support often build on one another. While software support and technical support may be available for individual purchase, signing on for hardware support means that software and technical support are included.

Additionally, service agreements rarely allow for the purchase of field engineering support without including hardware support, which brings along software and technical support. These mandates mean that service entitlements are often hidden within agreements.

Companies do not realize that existing hardware agreements inherently provide software or technical support and may purchase this protection separately.

80% of total IT costs occur after the initial purchase GARTNER

Optimizing Support for Your Organization

Reviewing and understanding the granular detail of service level agreements and entitled services may require the input of an expert. The companies with the most significant overspends often lack the expertise in-house to navigate complex service agreement contracts even while the threat of costly downtime is leading to additional support purchases.

A thorough evaluation of support needs and investments often reveals a minimum of a 20 percent overlap in support. Companies are either paying for support that is included in the purchase of the equipment (entitled service) or paying for the same support on multiple SLA.

With 98 percent of companies reporting that a single hour of downtime costs over $100,000, it is easy to see why businesses are eager to find protection that minimizes this impact. However, overspending on service agreements quickly adds-up as unnecessary annual contracts are renewed year after year.

Understanding your company’s support needs and how those needs are met through existing agreements is the first step to mitigating your exposure to SLA overspend.


Topics: Service Level Agreements


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