Guide on how to draft a Service Level Agreement (SLA)

A service-level agreement (SLA) specifies the amount of service you anticipate from a vendor, as well as the metrics used to assess service and remedies or penalties if agreed-upon service standards are not fulfilled. Any technology vendor contract must have this clause.

Any outsourcing or technology vendor contract must include SLAs. An SLA provides remedies when requirements aren’t satisfied in addition to listing service type and quality expectations. You can build SLAs for you and your client with the help of a service level agreement template.

What is SLA?

A service-level agreement (SLA) is a contract between a service provider and its customers that specifies the services provided and the service standards to be followed. A service-level commitment (SLC) is a larger and more extended version of a service-level agreement (SLA). Because an SLA is bidirectional and involves two teams, it differs from a traditional contract. An SLC is a one-way commitment that specifies what a team can promise its clients at any particular time.

What is the significance of SLAs?

SLAs assist service providers in managing customer expectations and specify the severity levels and circumstances under which they are not liable for outages or performance issues. Customers can profit from SLAs since the contract outlines the service’s performance characteristics compared to the competing vendors and the procedures for resolving service concerns.

The Service Level Agreement (SLA) is one of two core agreements providers often establish with their clients. Many service providers construct a master service agreement that outlines the terms and conditions on which they will interact with customers.

The service level agreement (SLA) is frequently referenced in the master service agreement of the service provider. The SLA adds further specificity to the services supplied and the criteria used to measure their performance to the other two service contracts. Service obligations specify the solutions that come with a service offering.

Service-level agreements define the performance expectations for a service provider and penalties and, in some cases, bonuses for meeting or surpassing those objectives. Make use of the service level agreement template that is available online. Outsourcing SLAs regulate a unique project because outsourcing initiatives get frequently customized for a particular customer.

SLAs are evolving to address the new ways as managed services and cloud computing services become more common. Service-level commitments construct broad agreements that are meant to cover all of a service provider’s customers rather than specialized resources, which characterize the newer contracting methodologies.

Types of SLAs

SLAs consists of three categories:

1.Service-based: 

Service-based SLAs apply to all customers and cover one service, which means that if a single type of service is provided to all customers (on a specific contract, tier, or plan, for example), the service-based SLA applies to all of them.

2.Customer-based: 

Client-based SLAs cover all services used by a single customer, as opposed to service-based SLAs. Service bundles are a perfect example of this. In some circumstances, a customer-based SLA may include multiple service providers.

3.Multi-level: 

With organizational customers, a multi-level SLA gets applied. The service-level agreement into levels that correspond to the organization levels in this case. For the same service, each level caters to a distinct group of clients.

Main components to be added on an SLA:

The following are crucial aspects of a service-level agreement:

• Overview of the Accord – the parties engaged, the start date, and a broad description of the services supplied are all covered in this first section.
• Services description – the SLA must include full explanations of each service provided and turnaround times in all possible scenarios. Service definitions should contain how services get supplied, whether maintenance services are available, what hours of operation are accessible where dependencies exist, a flowchart of operations, and a description of all technologies and applications used.
• Exclusions – specific services that are not provided should be mentioned in detail to avoid misunderstandings and assumptions from third parties.
• Service quality – the metrics and degrees of performance measurement get established, so both the client and the service provider should agree on a list of all the measures they’ll use to assess the provider’s service levels.
• Redressing – if a provider fails to meet their SLA, they should be compensated or compensated.
• Stakeholders – it establishes the roles and duties of the parties participating in the agreement.
• Security – the service provider’s security measures are defined that include Anti Poaching, IT security, and nondisclosure agreements.
• Disaster recovery and risk management – processes for risk management and a disaster recovery plan have been established and communicated clearly.
• Reporting and tracking services – this section outlines the agreement’s reporting structure, tracking intervals, and stakeholders.
• Periodic review and change processes – the SLA should be reviewed regularly, as should any defined key performance indicators (KPIs). This process, as well as the proper procedure for making adjustments, are both specified.
• Process of termination – the SLA should specify when the agreement can be terminated or expires. It’s also a good idea to figure out how long each party will provide notice.
• Signatures – finally, all stakeholders and authorized participants from both parties must sign the paper to indicate that they agree with every detail and procedure.

SLA Metrics Considerations

A corporation should consider the following aspects when deciding which performance measures to include in the SLA. Measuring proper conduct should be the goal. When designing the metrics, both parties should keep in mind that the metrics aim to motivate both the service provider and the consumer to behave appropriately.

Only aspects that the service provider may reasonably manage should get included in the measurements. It should also be simple to get the measurements. Furthermore, neither party should use too many metrics or measures that generate a lot of data. Including too few metrics, on the other hand, can be problematic, as omitting one can make it appear as if the contract gets breached.

A strong baseline must be established, with measurements set to realistic and achievable performance levels to make the metrics usable. Using the mechanisms outlined in the SLA’s periodic review and change section, this baseline will most likely be redefined throughout the parties’ involvement in the agreement.

Example Template