Service Level Agreements
A service-level agreement (SLA) is a contract between a service provider and its customers that documents what services the provider will furnish and defines the service standards the provider is obligated to meet.
A service-level commitment (SLC) is a broader and more generalized form of an SLA. The two differ because an SLA is bidirectional and involves two teams. In contrast, an SLC is a single-directional obligation that establishes what a team can guarantee its customers at any given time.
Why are SLAs important?
Service providers need SLAs to help them manage customer expectations and define the severity levels and circumstances under which they are not liable for outages or performance issues. Customers can also benefit from SLAs because the contract describes the performance characteristics of the service — which can be compared with other vendors’ SLAs — and sets forth the means for redressing service issues.
The SLA is typically one of two foundational agreements that service providers have with their customers. Many service providers establish a master service agreement to establish the general terms and conditions in which they will work with customers.
Key components of an SLA
Key components of a service-level agreement include:
Agreement overview. This first section sets forth the basics of the agreement, including the parties involved, the start date and a general introduction of the services provided.
Description of services. The SLA needs detailed descriptions of every service offered, under all possible circumstances, with the turnaround times included. Service definitions should include how the services are delivered, whether maintenance service is offered, what the hours of operation are, where dependencies exist, an outline of the processes and a list of all technology and applications used.
Exclusions. Specific services that are not offered should also be clearly defined to avoid confusion and eliminate room for assumptions from other parties.
Service performance. Performance measurement metrics and performance levels are defined. The client and service provider should agree on a list of all the metrics they will use to measure the service levels of the provider.
Redressing. Compensation or payment should be defined if a provider cannot properly fulfill their SLA.
Stakeholders. Clearly defines the parties involved in the agreement and establishes their responsibilities.
Security. All security measures that will be taken by the service provider are defined. Typically, this includes the drafting and consensus on antipoaching, IT security and nondisclosure agreements.
Risk management and disaster recovery. Risk management processes and a disaster recovery plan are established and clearly communicated.
Service tracking and reporting. This section defines the reporting structure, tracking intervals and stakeholders involved in the agreement.
Periodic review and change processes. The SLA and all established key performance indicators (KPIs) should be regularly reviewed. This process is defined as well as the appropriate process for making changes.
Termination process. The SLA should define the circumstances under which the agreement can be terminated or will expire. The notice period from either side should also be established.
Signatures. Finally, all stakeholders and authorized participants from both parties must sign the document to show their approval of every detail and process.