IT Service Providers See SLAs Shift from Technical Promises to Business Risk Mitigation

The purpose of the IT service agreement is changing. In enterprise technology, what was once a rigid technical checklist is now becoming a strategic tool for delivering business value. The industry is moving away from traditional SLAs, with their narrow focus on uptime and response time, toward more holistic, business-aligned Experience Level Agreements (XLAs). As the market for managing these agreements grows, some leaders are looking to XLAs to improve business outcomes. That move is a key part of a larger IT transformation where the value of technology is judged less by its technical proficiency and more by its direct impact on enterprise outcomes like revenue continuity and risk avoidance.

We spoke with Paul Neuman, the Head of Go-To-Market Services at IT Services Demystified, to understand the mechanics of this new reality. His authority on the subject comes from decades of experience, including extensive work at HP where he managed a €130M P&L. As the author of IT Services Contracts–Key Elements and an inventor with 19 granted patents, Neuman has a rare, nuanced understanding of how complicated technology contracts connect to the tangible realities of global business.

Traditional SLAs focus on technical metrics like uptime percentages, response times, and ticket resolution speeds that sound rigorous but often miss the actual business consequences of failure. “If your SLA isn’t tied to business impacts like revenue risk, data availability, and customer experience, it’s just a technical promise. Modern agreements have to quantify operational resilience, not just uptime," he says.

According to Neuman, a service agreement is often flawed from the start if it begins with a price negotiation. A successful partnership, he says, begins with a deep discovery of business-wide pain points across all departments long before the procurement team is ever brought into the room.

• Start with stakeholders: Effective discovery is designed to build a final solution that solves strategic business needs. This happens at the department level, not the procurement office. "The first rule is to not start with procurement. Procurement is the end of the chain. You must begin with the business stakeholders, people in HR, supplies, all the métiers, to understand their pain points," says Neuman. "Only after a solution is built and approved by the C-level can you go to procurement." He inverts traditional procurement dynamics where price anchors the negotiation. "Focus on the value before talking about price. You give a value first, and from that value, a price is determined. That is the logic."

That philosophy clarifies the economics of a modern service agreement. Neuman’s key insight is that profit margins are not derived from internal targets, but from the quantifiable value created by mitigating a customer’s business risk. The financial impact of downtime is concrete: a downed PC means "the production is down," or a broken cash machine means "cash is not coming in." Quantifying the impact helps justify a premium price. The concept of revenue continuity risk is often positioned as the true, measurable source of value. The takeaway is clear: standardized price lists are obsolete, and agreements should be tailored to a client's specific context.

• Margin from mitigation: The source of profitability shifts entirely when value drives pricing rather than cost-plus formulas."Margin doesn't come from your company's will or dreams. It comes from the customer's perspective. It comes from risk avoidance. My customers almost never had the same price for the exact same service level, because their reality was completely different, and therefore their risk was different too," Neuman says. Geography and operational constraints can make uniform SLAs impossible in practice. "I can commit to a next-day SLA around Oslo. But for your site in the far north? No way. In winter, it might take two days for a technician to get there, and travel by road would be impossible. They might even need to take a plane."
• Dysfunction downfall: Achieving this kind of partnership depends on operational maturity, and Neuman says many organizations simply do not have it. Lacking visibility into their own IT delivery, they default to escalation instead of strategy, forcing providers to rely on safeguards to prevent penalties from being triggered by statistically insignificant samples. “The vast majority of customers have no clue what’s going on with their own IT delivery. They are navigating without a compass. They see a rock and avoid it, but they don’t know where they’re going," Neuman says. The financial consequences of that dysfunction can compound quickly. “I had a client who took four years to sign a contract. By the time they agreed, the price had increased by 47 percent on top of an already healthy margin. The contract was profitable, but the relationship was so dysfunctional I refused to renew it.”

The second path can lead to what Neuman considers the pinnacle of a trusted partnership: a transparent, cost-plus model. He successfully implemented this with major clients like GSK Vaccines, where his team, under NDA, shared their costs and agreed upon a fair margin. He stresses that achieving this level of transparency is only possible through a very strong relationship built on mutual trust, though the rise of AI-augmented environments tests this entire model. Neuman offers a key distinction: while AI-driven predictive maintenance may reduce a provider's internal costs by optimizing spare parts inventory, it does not automatically reduce the value of the business outcome for the customer. The insight leads to sophisticated, context-aware advice for 2026: leveraging AI-driven savings as a strategic tool while carefully tailoring the approach to the specific business relationship.

• The loyalty bonus: For established partnerships, AI-driven cost savings become a tool for deepening trust rather than simply protecting margin. "For an existing customer, I would proactively offer a price reduction as a way to share the benefits of our AI-driven efficiencies. That sends a very strong message that helps secure contract renewals and push aside the competition," Neuman explains. New client acquisition requires a different calculus that accounts for transition risk." Any transition is a risk. Any risk is money. When you create a business case, you need to be able to demonstrate that the cost avoidance the customer will get from taking your services is going to offset the risk of transitioning from their current supplier to you. That's the mechanics."

Neuman offers a final, practical point, clarifying that the goal of transparency has professional limits. He notes that a provider’s internal component failure rates are highly confidential information that is rarely, if ever, disclosed upfront. Such secrecy introduces a new operational security challenge: an employee carelessly feeding sensitive data into a public AI tool. One practical solution, then, is to focus negotiations on contractually defining outcomes rather than demanding proprietary data. By agreeing on a maximum acceptable failure rate, he explains, the contract itself can become a tool for risk mitigation, creating a professional boundary that respects privacy while providing accountability.