Service Level Agreement (SLA)

 

A Service Level Agreement (SLA) is a contract between a service provider and its internal or external customers that documents what services the provider will furnish and defines the service standards the provider is obligated to meet.

Why are SLAs important?

Service providers need SLAs to help them manage customer expectations and define the circumstances under which they are not liable for outages or performance issues. Customers can also benefit from SLAs in that they describe the performance characteristics of the service, which can be compared with other vendors’ SLAs, and also set forth the means for redressing service issues — via service credits, for example.

For a service provider, the SLA is typically one of two foundational agreements it has with customers. Many service providers establish a master services agreement to establish the general terms and conditions in which they will work with customers. The SLA is often incorporated by reference into the service provider’s master services agreement. Between the two service contracts, the SLA adds greater specificity regarding the services provided and the metrics that will be used to measure their performance.

What goes into an SLA?

In broad terms, an SLA will typically include a statement of objectives, a list of the services to be covered by the agreement and will also define the responsibilities of the service provider and customer under the SLA.

The customer, for example, will be responsible for making a representative available to resolve issues with the service provider in connection with the SLA. The service provider will be responsible for meeting the level of service as defined by the SLA. The service provider’s performance is judged according to a set of metrics. Response time and resolution time are among the key metrics included in an SLA, since they relate to how the service provider deals with a service interruption.