In order to better measure vendor performance and afford better control over vendor relationships, data managers should tailor their service level agreements (SLAs) to individual vendors and products, said Peter Largier, global head of reference data analysis at Credit Suisse, during his speech at FIMA 2009’s focus day. This process should begin with defining how critical their services are to your business and end with agreement on a detailed SLA, he explained.

Credit Suisse determines the criticality of vendor service provision by examining the potential impact of a failure within the vendor’s offering. “If the impact of a failure means that your core business is stopped as a result, then this is a high level risk and should be categorised as a level one vendor service,” said Largier. The bank uses three categories to determine this business impact and therefore the level of the vendor, with three being the least critical.

The endeavour should also include a review of what other vendors in the space provide and how complex a process it would be to move from one vendor to another, he added. “This depends on how integrated the system is into your infrastructure and has a significant impact on the cost of replacing a system with another,” he contended.

For new vendor products, all this work should be conducted before negotiations are begun, according to Largier. “Before negotiating you need to look at all aspects of the relationship including the costs of integration and implementation, as well as licensing.”

In terms of existing relationships, Largier suggested adding in an SLA at the time of renewal in order to set in place key performance indicators (KPIs) by which to judge the vendor’s service provision. “In the first year of the SLA there needs to be clear ownership of this relationship management within your firm and you need to nominate an individual or a team to measure performance against KPIs,” he said.

Largier did concede that tying a vendor down and keeping them to their promises is harder than it would first seem. “SLAs only work if you define the penalties for non-compliance first,” he added. He suggested therefore using penalties such as retaining a set percentage of the contract value if vendors renege on their promises, but did not, when questioned by an audience member, indicate whether Credit Suisse was in the practice of doing this often.