What Is Service Level Agreement SLA?

19-Mar-2020

What is a Service-Level Agreement (SLA)?

Service Level Agreement is a legal contract between the customers and the service provider in which the level of service expected by the customer is defined. The agreement consists of the metrics by which the level of service is measured along with cost or fine (if any) which needs to be paid if the service provider does not meet the promised services. SLA defines the service standard and it could be between an organization or external customers or any two departments within an organization.

What is the Importance of SLA?

SLAs are an indispensable part of the contract between customers and suppliers. In this agreement, there is a collaborated info about the contracted services and the expected reliability of service on a single document. An organization requires SLAs for managing the customer expectations and the circumstances in which they are not liable for performance issues. 

The document clearly states all the factors, responsibilities and expectations so that if there is an issue with the services, neither the customer nor the supplier can appeal for ignorance. SLA ensures the understanding of requirements and protects both parties.

Why is the SLA Required?

SLA is a document which not only includes the description of services or expected levels but it also has the objectives and list of metrics, using which the services offered by the supplier can be measured. It also includes the fixes, fines or penalties for the disruption of the service and a line of the agreement for the addition or removal of metrics from SLA.

For example, the service provider owns the complete responsibility of providing the level of service as defined in the SLA, which is calculated as per the metrics set by the customer and supplier. If the service is interrupted, the response and resolution time become the key metrics in SLA. In case, the service level is not met due to incomplete information from the customer's end, the supplier will not be responsible.

What are the Major Peripherals of SLA?

Majorly the SLA should include the components- services and management. 

The service components include the specifications about the service provider, responsibilities, cost, conditions for the availability of service, etc. 

In the management components, the method and measurement of standards, process of resolving the dispute, solutions for service level breaches, etc.

The Major Peripherals of SLA include:

• Agreement Analysis- This is the first section in which the basics of the agreement such as customer and service provider, start date of the service with a general introduction.
• Details about Services- SLA must have all the details about the services offered by an organization including possible circumstances and a total time of service. In the service definitions, SLA should info about how the services will be delivered, operational hours, process outlining, maintenance services and a listing of applications and technology used while serving.
• Evictions- The services which are not offered under the specific service must be clearly mentioned in the SLA to avoid any kind of confusion and assumptions from customers as well as service providers.
• Performance of Service: The metrics and level of performance are defined in SLA. It should be such that the service provider and customer should agree on all the metrics for measuring the performance.
• Reimbursement- The compensation of breaches must be defined in SLA if the service provider is unable to serve with a promised level of service.
• Shareholders- The agreement must include the details about the parties involved in the services and their responsibilities.
• Security- The SLA must have details about the security measures taken by the service providers for the completion of services.
• Discontinuation of service- In this section of SLA, the circumstances are defined which can lead to termination of the service. There should be proper info about the notice period.
• Signature- Once all the factors are defined, the shareholders and all the authorized members need to sign the SLA. It will reflect the approval from the customer as well as the service provider for all the details and processes.

What are the Different Types of SLAs?

The software industries focus on different types of structuring the SLAs. A number of factors are considered while deciding the SLA structure. The structural components include:

1. Corporate Level: All the general issues related to the organization are covered and would be the same throughout the organization. For example, every employee is required to create a password of 6 characters and it must be changed every thirty days.
2. Customer Level: The issues specifically related to the customer can be easily dealt with. The security requirements of the organizational departments are higher. For example, the finance department needs to handle financial resources with more care.
3. Service Level: All issues related to a particular service (with a customer) are covered. It is applicable to all the customers using the same service. For example, IT support is contacted by everyone using the same IP address.

Using this multi-level structure in large organizations will reduce the duplication of effort with customization options for all customers and services. So, corporate-level SLAs are applicable to everyone and all the departments of the organization, customer-level SLAs for departments and so on.

What are the Benefits of implementing SLAs?

Here is the list of factors which makes SLA a beneficial agreement:

• With this agreement, the customer will have improved customer service.
• The procedures are defined thoroughly.
• This document is negotiated by both parties and then mutually accepted.
• Using SLA, the standards of customer service are set.
• SLA helps the parties for proper communication.

How to Set Metrics in SLA?

In order to measure the level of service offered by the service provider, Service Level Agreements define various metrics. Although it is difficult to choose metrics that are fair to both the service provider and the customer, still some important factors need to be added. The metrics must be designed in such a way that it is under control. If it is uncontrollable, it would become unfair to hold them accountable as metrics of the services provided by the service provider.

Using metrics, the service provider can collect the data easily and correctly. Instead of designing a number of metrics, it is better to have fewer ones which can measure more accurately as there is hardly any time for analysis.

Service Level Agreements are the basic and foremost requirements while creating a relationship between a customer and the service provider. If proper metrics are there, both the parties will be clear about transparency and trust. Both the parties are accountable to negotiate about the metrics and level of service.

Some Examples of Service Level Agreement

In common terms, SLA is the formal commitment of service provided by the service provider to customers. Following are some examples of SLA:

Uptime- It is usually considered as the availability of the service provider.

Call Metrics- It is typically for the call centers in which they follow an array of call metrics such as queue time.

Satisfaction of Customer- The standards of customer service teams of all organizations such as the help desks are measured through the rate of customer satisfaction.

Quality- Some communication organizations measure the quality by asking the people to provide feedback for the services.

Backlog- The unfinished work is usually measured according to the average backlog of the service such as some help desks guaranteeing that their backlogs will not exceed more than 2 days.

Business Results- The service commitments are completely related to the business result. Some examples are sales, revenue, conversions, etc.

Recovery Time- This is the mean or average time for the recovery of some incidents.

Turn Around time- It is the total time taken by the service provider to complete the task. The turnaround time could be measured as average, mean or maximum.