What is a Service Level Agreement?

What is a service level agreement?

A service level agreement, or SLA, is a formal document outlining the services a provider agrees to deliver to a client. It clearly sets expectations for performance, timelines, and responsibilities for both parties. By establishing defined standards and measurable outcomes, an SLA helps create mutual clarity and accountability across the service partnership.

Why are SLAs needed?

Service providers, such as cloud, network, and managed service providers (MSPs), effectively manage customer expectations using service-level agreements. Additionally, these documents can help to protect providers by outlining circumstances in which they are not liable for outages or performance issues.

SLAs are also beneficial for customers, as the contract clearly describes the performance characteristics of the service. Therefore, providers need to ensure they meet the service requirements outlined in the agreement, and it can be used to compare with other providers’ SLAs, to determine that any service expectations are fair and suitable for the customer.

What are the different types of service level agreements?

Service level agreements generally fall into three categories: customer SLAs, internal SLAs, and multi-level SLAs.

Customer SLAs
This type of agreement is established between a service provider and either an internal or external customer. The expectations, deliverables, and performance metrics are mutually defined and agreed upon before services commence.

Internal SLAs
Internal SLAs are created within an organisation. Typically, they outline the responsibilities between internal teams, such as the IT department providing support to another department within the same company or organisation.

Multi-Level SLAs
A multi-level SLA structures the agreement into different tiers, tailored to various customer segments or service packages. For instance, a software provider might include a universal support level for all users, while offering enhanced services for customers on premium plans.

Key components of a service level agreement

Whilst every SLA will be slightly different depending on the specific requirements of the provider and customer, most agreements will include the following elements:

Agreement overview – this presents the basic information required, such as the parties involved, the start date and a description of the services provided.
Service definitions – an SLA needs to include detailed descriptions of every service being offered, plus turnaround times for each one. These service definitions should explain to the customer the service delivery methods, maintenance offerings, operating hours, and other details.
Service performance – outline of performance measurement metrics and performance levels. Both parties should agree on the metrics used to measure the provider’s service levels.
Exclusions – any services that are not offered should be clearly expressed to avoid any confusion or misunderstandings.
Service tracking and reporting – this section outlines the reporting structure, tracking intervals and stakeholders involved in the agreement.
Termination process – the agreement should establish the circumstances under which it can be terminated or will expire.
Signatures – both parties must sign the agreement to confirm their understanding and approval of every element of the document.

What are the benefits of SLAs?

Clarity and transparency – SLAs ensure both parties have a clear understanding of their expectations.
Accountability – by establishing responsibilities and the potential penalties of not meeting those responsibilities, service level agreements encourage accountability.
Risk management – SLAs help to mitigate the risks associated with service delivery.
Stronger relationships – well-defined SLAs can result in improved relationships between providers and customers built on clear communication and trust.