SLA management matters. Because SLAs (service level agreements) are crucial tools for operations, customer success, and cost management, it is critical to have systems and processes for the governance of SLAs. The average enterprise service contract may entail monthly invoices that each have massive amounts of data: potentially tens of SLAs or KPIs (key performance indicators) and thousands of performance data lines. Such contracts require dedicated administration teams with time-intensive financial, operational, and compliance responsibilities.
Smart Legal Contracts for SLAs
The rise of smart legal contracts represents the evolution of contracts from static, textual repositories to dynamic documents that are both human- and machine-readable. This conceptual shift introduces no better opportunity for businesses than perhaps that found in SLAs, whose data-oriented requirements befit automatic measurement and fulfillment much better than management by humans. The time to implement smart SLAs is now.
SLA definitions and parameters are modernizing. “Traditional SLAs focus on meeting a minimum level of service with scant attention to how services align with rapidly changing business requirements. Modern SLAs are baselined during transition and transformation and reflect a digital environment with agile metrics, such as lead time from idea to production, number of automated daily test cycles, percent of all testing that is automated, and release frequency and reduction in baseline defects.”¹ The infrastructure that links these dynamic contractual requirements to the sources that house relevant data must be similarly dynamic.
Advanced, comprehensive ITSM and managed services platforms are in widespread use across enterprises. These solutions enable vendors to deliver, and customers to access data-rich, data-driven, automated, and optimized services. This is a trove of data that can feed smart contracts to trigger contractually-mandated actions, ensuring verifiability and transparency.
Smart SLAs: A ServiceNow Example
Smart SLAs have three core traits:
- They have natural language text, the top legal prose layer
- Their variables (e.g. prices, percentages, durations) have an underlying data model
- They are capable of being triggered to automatically perform contract requirements and other post-signature actions on internal and external systems.²
Smart SLAs can take a number of forms, depending on their contractual and technological context. Consider one example for IT SLAs integrated with ServiceNow, the digital workflow platform. ServiceNow collates service requirements to enable monitoring and reporting against agreed service levels. It offers functionality like tracking and displaying service tickets statuses in workflows.
The connected SLA above extends ServiceNow capabilities for both vendors and customers. It can automate the configuration of service contracts and embedded SLAs in ServiceNow by passing already-modeled contract requirements and parameters using JSON REST APIs. Where ServiceNow data indicates a breach, the connected SLA can generate exactly how much a customer is owed; if a vendor achieves specified performance levels, the precise amount that the vendor can earn back can be calculated; and so on. The connected SLA is also able to generate invoices and even, if desired, settle full payments by kicking off workflows on accounting and finance software.
Each of the layers of smart SLAs outlined above offers advantages. Because the natural language layer of traditional SLAs are maintained, smart SLAs remain familiar and user-friendly. This continuity of the outer form means smart SLAs are commercially experienced and court-tested.³
The ability to perform actions on other systems is the most impactful of smart SLAs features. A services contract can self-execute to compare achieved service level percentages retrieved from external system to the minimum service levels in the contract, applying, for instance, credits to the customer account in the case of failure to meet contracted levels.
Smart SLAs bring multi-stakeholder benefits. Purchasers benefit from smart SLAs, which can be highly effective tools in managing vendors, automating payments and credits, guiding behavior to reach desired results, and creating dynamic relationships. Vendors benefit from smart SLAs by being able to offer enhanced visibility and guarantee service level delivery. Purchasers and vendors stand to benefit from minimization of costly disputes and costly management, arbitration, and resolution of those disputes.
This technology is available now. In a joint effort with Elevate, Clause is bringing smart SLAs to the market for immediate commercial use. We are combining a category defining tool — the smart legal contract technology of Clause — with the expertise of Elevate’s leading global consulting and technology services to reign in the next phase of SLA management.
 Examples: Automate the calculation of prices and cause actions on other systems, e.g. SAP Ariba, to update vendor profiles; Stripe, to make credit card charges automatically; HTTP, to make requests to online web services; MQTT, to publish messages to interested IoT devices.
 Smart SLAs are modelled by data schema, as the second point above indicates. This has a number of benefits for different end-users. For contract drafters who use smart legal contract templates for new drafts, the parameters entered in the contract are validated against the data model to ensure correct data types are entered into the contract. For IT users who aim to convert existing and already-signed SLAs into their smart version, smart legal contracts provide contractual data and events in structured format which allow the passing of data to business intelligence and management tools.