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Service Level Agreement

Posted on 2014-10-07
Medium Priority
Last Modified: 2014-10-13
Hi there

We have started doing service level agreements about 2 years ago for customers.
i have been noticing that we are not making enough money or rather that we spend more time on the clients than what we get paid.
our model work on a per PC/laptop/server basis.
Example: we charge $150 per month to look after say 10 PC's on a network....fairly simple.
it includes all support except hardware failure.
i'm just not sure if this model works and if its the right way to do it.

what other ways/options are that i can use to make it more profitable and still be a win win situation.

your advice will be greatly appreciated

thank you
Question by:stevenvanheerden
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LVL 52

Accepted Solution

Vitor Montalvão earned 668 total points
ID: 40366376
we charge $150 per month to look after say 10 PC's on a network....fairly simple.
Simple? Depends on what you mean with "to look after".
$150 could be the rate for 1 man/hour and you are charging for full month.
Your clients must be the more happiest clients in the world :)
LVL 13

Expert Comment

ID: 40366394
I guess it depends on where you're located, We use this formula: # computers X 0.2 = # hours per week. So, in you example, it would be 10x.2 - 2 hrs/wk. If they don't have a server, it might be less, but if they have apps or software/web to support, it could be more. This is just a "ballpark" figure as a starting reference. We have an hourly rate, but provide discounts for agreeing to a certain # hrs/wk.

Then, we bill the same amount on the 1st & 15th of every month.

There is also an understanding that we may be behind or ahead on the # hrs spent on their computers, but it all evens out over several months. If it gets too far ahead or behind, we then adjust the invoice accordingly.
LVL 52

Expert Comment

by:Vitor Montalvão
ID: 40366439
I wouldn't make a contract based only in the number of computers. If you don't put a limit of hours that can be used they will call you for every little thing that happens.
Try to sell time. A package of hours. Something like $1000 for each package of 10 hours. This is only an example. You need to find a value that fits for you.
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LVL 26

Expert Comment

by:Fred Marshall
ID: 40366532
I believe the key here is whether you offer open-ended services for a fixed fee.  
In this case you *are* offering open-ended services for a fixed fee.  

I'd modify the approach to do something like this:
- For a fixed fee per month you will do things that are well-defined and valuable to the customer:
  This would include checking on security software and other software updates and currency.
  It could include checking the backup system to make sure it's working as intended.
  It could include running specific scans.
  ... in other words all the stuff that the customers need but probably don't deal with themselves very well.
- Time and materials for everything else.

Author Comment

ID: 40367216
Hi Guys

thanks a lot for your insights. so many different ways to approach this i guess.
i like all of your ideas and i can work with some of it.
i must say its hard to determine the value, especially cause we pride ourselves in a complete IT solution.
we look after almost everything and supply basically everything...from the internet connection, firewall, servers switches, routers, Access Points (some have as much as 20) right down to the PC/laptop/mobile device. all of that carries a responsibility.
i have been told one must work with billable hours as a guideline as well.
for instance 1 guy should clock 8 hours a day X 5 days = 40 hours X 52 weeks / 12 gives you 173 hours a month. now multiply that with your charging rate...i can tell you that i know we don't earn that.

can you guys maybe give me an example of how you would work out an average customer we support if this is the scenario?


Internet Connection
Router and Switch
UTM appliance like watchguard or Firewall like PFSense
Standard Server with perhaps 2 to 3  third party apps running
Exchange server onsite or hosted
20 Users with either laptop or desktop
10 Users with Mobile devices like Tablets or Smartphones

just a good guideline will really be appreciated and help me with making some important decisions.

thanks a lot so far
LVL 13

Assisted Solution

notacomputergeek earned 668 total points
ID: 40367276
If it was my potential client, I would start by suggesting they schedule 5 hrs/wk (but I wouldn't count the cell phones) and bill twice a month. I like to keep things simple, so I hire people who know a lot about a lot and tell the client, "I don't care what you have, we work on it all and it's $x per month and that equates to $x per hour." Remember, they're working on a budget also, so they may say they can only afford 4 hrs/wk. Then you get done what you get done and some things may have to wait.

We have separate hourly rates for different type of work, but generally throw that out the window when someone wants scheduled service. Keeps us from having to track 10 minutes on a server, 30 minutes on a desktop, 20 minutes on a router, etc all at different rates. Simple for them to budget, simple for us to bill.
LVL 26

Assisted Solution

by:Fred Marshall
Fred Marshall earned 664 total points
ID: 40367368
The formula you gave is for revenue.  It generally doesn't work that way even though we might like it to...

One data point is this:
Companies that charge out their time have a hard time getting their hourly rate to be below 2.1 or 2.2 times salary.  This is what companies in highly competitive service businesses can charge.  With less competition for raw hours and likely more real value-added, it's more like 2.5 times.

Part of the reason for that is because workers aren't "on the job" 100% of the time.  They have vacations, sick leave, training, company meetings, etc.  And they may have "down time" when there's no work.

The company has expenses like rent, advertising, telephones, accounting and other labor that's not direct-chargeable.
No matter how small your company, this is still the case.  For example, *I* do all my own accounting and non-chargeable time goes to doing that.

The other aspect is: What does the competition charge in your area?  For work like yours in rural communities, a rate like $110 or $120/hour is normal for a server-capable service company.  Never below $75/hour for similar work.  So there's a range.  We *only* do hourly work and don't offer fixed-fee services as you describe.  Note that there isn't a schedule for different types of work - one size fits all.  This is reasonable if you're providing good value over all.

Author Closing Comment

ID: 40378008
Hi Guys

Thanks a lot for your feedback.
i totally agree with you, the fixed rate will have to go.

thanks for your help in this regard.

kind regards

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