service level agreement - signing to agree to terms

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The service level agreement (SLA) can help you to evaluate potential service providers. This document is important both because it establishes what kinds of services are included and the quality parameters with which they must be performed. The SLA also notes what the fixes or next steps are when a provider does not succeed in meeting the specifications within the SLA contract.

In this article, we look at what an SLA is, key sections that are usually included, and a few frequently asked questions on the topic.

Service level agreement definition

A service level agreement is a contract between a customer and the provider of a service related to the content and quality of services to be provided. An important component of an SLA is metrics, which can be gauged to determine if the agreement is being properly upheld. Hosting providers and other IT firms, as well as many other types of companies, standardly use SLAs to govern relationships with their customers.

These contracts are often associated with tech businesses due to their service model but have been in general use since the late 1980s.

Note that within entities that do not have provider-client arrangements that are typical of vendors, the SLA becomes an operating level agreement (OLA).

Important provisions within an SLA

Before looking at the specific sections, it is worth noting that you can use the SMART model from George T. Doran to help guide its construction. SMART stands for specific, measurable, achievable, relevant, and time-bound. Any expectations of the SLA will be better defined if you ensure they have these characteristics.

To look at the contract more closely, typical components of a service level agreement include the following:

I. Service description – This section should discuss the services that the vendor is conducting, the actual tasks that will be completed, and when these services will be delivered. It should include:

  • Overview of services that are to be delivered, including types and tasks
  • Timeframes when support is available for the various kinds of service
  • Process and details for contacting the provider.

II. Responsibility description – In this part, you want to assign responsibility for all aspects of service provision. This section should delineate:

  • The responsibilities assumed by the vendor
  • The responsibilities assumed by the customer
  • The responsibilities that are split between the two parties.

III. Operational specifications – Guidelines for operations are necessary within a service setting so that the provider can meet the parameters they have established. It is key to identify and track these elements, because the level of service performance achieved may depend in part on operational parameters. You may have to update the SLA related to operations if the number of users goes beyond what you have stated within this section, or if you no longer have sufficient oversight and control over the parameters.

IV. Service level goals (SLGs) – The understanding from a client in terms of the performance of services is typically included within this area of an SLA. The way that the organization will perform in terms of metrics (measured elements) allows a customer to know if a vendor is upholding its end of the bargain. The specific data that is needed to determine performance will vary based on the type of service and the variables used for measurement. When a hosting provider promises uptime of 24/7, 99% uptime, for instance, that is a commitment related to the equipment and network availability metric. When a provider commits to solve key problems within two hours, that represents them assuming a responsibility related to the critical incident resolution metric.

V. Service improvement goals (SIGs) – An SLA may also state expectations for how much a service level goal will get better as time passes – both in terms of rate increase and amount increase. Performance data for SLGs will be used for this calculation, along with the development of a performance trend related to a set stretch of time. By looking at the trend, you can tell if the provider is meeting the required rate.

VI. Service performance penalties & incentives – Service level agreements should certainly have penalties related to not meeting its parameters, but incentives can also be included. The service provider could be financially incentivized to outperform the service goals.

VII. Reporting on service performance – This section details service reports and charts that the vendor will supply to its clients, allowing a direct comparison of the service goals to the true performance. A graph can be helpful because you can visually see whenever the level of services that is supplied falls below the service goal.

VIII. SLA signatures – Finally, you want to have the agreement signed into effect by both parties, the client and the vendor. Without the signatures, this document cannot be binding.

FAQ about SLAs

Here are some typical questions that people have about service level agreements:

1. Why are SLAs important?

A service level agreement is key to defining the relationship between a customer and supplier. It is a compilation of details on all services that are being provided and how quality level will be maintained. These documents are important because they provide clarity for expectations, setting down on paper what might otherwise be assumptions. The transparency of stating responsibilities, guidelines, and metrics in real numbers allows you to know that everyone is on the same page.

Does an SLA automatically transfer?

Signing an SLA may make you feel that you are safe with a service moving forward, but it is important that the agreement is not with the service but the provider. Therefore, if a merger or acquisition occurs, your SLA may no holder have any relevance. Never think that an SLA will remain in effect when the ownership of an organization is transferred. However, you will often find that the acquiring company will agree to meet the terms of SLAs that are already in effect simply as a customer satisfaction gesture.

What metrics should be included within the SLA?

You will want to define the metrics that determine whether you are performing the service in an acceptable manner. You want the monitoring of metrics to be very simple and to gather the applicable data through an automated system for better reliability.

Although metrics are not always the same, those that are key to track will often include:

  • Availability – This provision describes the extent to which a service can be accessed and used during a certain time period. The provider may offer 99.9% availability during regular business hours, for instance, with lower availability outside that window.
  • Defect rate – This figure gives you the rate or quantity of mistakes that are allowable within important deliverables.
  • Technical strength – When you have software developed by an outside firm, you can use a tool to check for problematic aspects such as size and errors in its script.
  • Security – When your network or a particular system gets breached, you can lose a lot of money. For any elements of security that are measurable, it is important to keep track of those metrics since they will help determine if the appropriate steps are taken in order to avoid compromise of the data. An example is patching and updating of an antivirus system.
  • Business outcomes – Often organizations will want to include measurements related to business processes. It is fine to do that using key performance indicators (KPIs) if you are able to determine the provider’s responsibility related to those KPIs.

How do you tell if SLA service levels are being maintained?

The majority of organizations that provide services will give you metrics, whether through their website or otherwise. The data that is included makes it simpler for customers to know if the vendor succeeded in hitting all the expectations described in the contract.

The right provider and the right SLA

Knowing what to look for in an SLA is important, but finding the right provider is even more critical. At Total Server Solutions, our platform is designed for high performance, and our long-term success is entirely dependent upon the success of our customers. See our service level agreement.