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What is a Service Level Agreement (SLA)?
A service level agreement (SLA) is a contract between service providers and customers. It defines the performance expectations, service quality, response times, escalation procedures, and other relevant metrics for the delivery of a particular IT service. An SLA provides clear guidelines and criteria against which the success of the service provider can be measured, and customer satisfaction ensured.
Three types of service level agreements
The three common types of SLAs are:
- Customer-based SLA:
- This type of SLA is created individually for each customer. It considers the specific requirements, needs, and expectations of the customer and defines the agreed performance indicators and metrics for the service.
- Service-based SLA:
- This focuses on a specific IT service or group of services. The SLA defines the performance standards, response times, availability, and other relevant metrics that apply to the service. The SLA therefore applies to all customers who use the same service.
- Multilevel SLA:
- This SLA is used when the service depends on different support levels or tiers. Each level has their own performance indicators and responsibilities. The multilevel SLA enables differentiated consideration and treatment of different support levels.
Key components of an SLA
A well-thought-out, structured service level agreement includes the following components:
- Contract overview: Basic information about the parties involved, start date, and a general introduction to the services included.
- Stakeholder list: Clear definition of the parties involved and their responsibilities.
- Description of Services: Detailed descriptions of all services provided, including turnaround times, deployment methods, maintenance services, uptime, dependencies, process overviews, and technologies used.
- Service tracking and reporting: definition of reporting structure, tracking intervals, and stakeholders involved.
- Service performance: defining performance measurement metrics and levels to assess the provider’s level of service.
- Exclusions: Clearly defined services that are not offered to avoid misunderstandings.
- Security standards: Establish security measures, including anti-poaching, IT security, and non-disclosure agreements (NDAs).
- Penalties: Setting out clear financial or other consequences that both parties face for failing to meet SLA obligations.
- Risk Management and Disaster Recovery: Describes the process and mechanisms in the event of a provider service outage, including restart times and alerts.
- Regular review and change processes: Regular review of the SLA and key performance indicators (KPIs) to ensure they meet current requirements.
- Termination process: Definition of the termination circumstances and deadlines.
- Signatures: Signature of the SLA by all authorized participants from both parties to agree to the details and processes.
Who needs an SLA and why? Examples
A service level agreement is relevant to companies and organizations that purchase or provide services from internal or external service providers and find use in a variety of industries. Here are some examples of who needs an SLA:
- IT service providers: IT service providers, whether internal IT departments or external service providers, require SLAs to provide customers with clear expectations regarding the performance, availability, and support of IT services.
- Cloud service providers: Cloud service providers such as AWS provide SLAs to guarantee their customers the promised performance, security, privacy, and availability of their cloud platforms.
- Outsourcing partners: Companies that outsource certain business processes or functions use SLAs to ensure that the outsourcing partner meets the agreed service levels and achieves the desired results.
- Customer support: Companies that provide customer support services can use SLAs to establish response times, support channels, and customer satisfaction goals.