SLA is an acronym that stands for “service level agreement.” SLAs are contracts between service providers and their customers that document the level of service expected from the provider. These agreements have become increasingly crucial in today’s outsourced, cloud-based business environment.
This article will examine what an SLA is, the key components of an SLA, different types of SLAs, and the benefits these agreements provide both service providers and customers. By the end, you’ll have a thorough understanding of the SLA meaning and purpose
What is an SLA?
A service level agreement (SLA) is a contract that defines the service expectations between two parties – typically between a service provider and an external customer. SLAs can also be set up internally between business units in the same company.
SLAs outline the services being provided, along with measurable definitions of their availability, performance and other service quality metrics. These metrics are used to gauge whether service levels are being met.
Key components of SLAs include
- Description of services
- Performance standards and metrics
- Roles and responsibilities
- Security protocols
-Penalties for non-compliance - Termination terms
Ultimately, SLAs help align provider and customer expectations while holding the provider accountable for delivering on agreed-upon service levels.
Types of SLAs
There are several types of SLAs used for different business purposes
Customer-Based SLAs
A customer-based SLA is between a vendor and an external customer. It defines the specific services the vendor will provide that customer.
Internal SLAs between business units are also customer-based. These define services and performance standards between internal teams like IT and other departments.
Service-Based SLAs
Service-based SLAs define the standards for a particular service or product offering across all customers. For example, an IT service desk may have a standard SLA for all users defining incident response and resolution times.
Multilevel SLAs
Multilevel SLAs cover multiple parties or tiers of service in one agreement. A multilevel SLA may be used to cover multiple service providers, various internal departments or different product tiers.
SLA Components
While SLAs differ across industries, there are standard components found in most agreements:
- Overview: Parties involved, start date, duration, services outline
- Service Details: Full description of services, delivery specifics, dependencies
- Roles and Contacts: List of stakeholders, responsibilities, contact info
- Performance Standards: Service level objectives, metrics, monitoring
- Exclusions: Exemptions like maintenance downtime
- Security: Data protection standards and protocols
- Penalties: Compensation for unmet service levels
- Indemnification: Protection for the customer
- Review Process: Procedure to revise terms over time
- Termination Terms: Cancellation process and notice period
Thoughtfully addressing each component helps maximize the SLA’s effectiveness for both parties.
SLA Metrics and KPIs
SLAs outline the agreed upon service levels, while key performance indicators (KPIs) are used to measure performance against those standards.
Common SLA metrics include:
- Uptime/availability percentage
- Service error rate
- Issue response time
- Time to resolution
- Security incidents
- Customer satisfaction
Selecting the right KPIs during SLA development is critical for properly evaluating service quality. Metrics should be measurable, relevant and limited to the most vital data points.
Benefits of SLAs
When developed collaboratively, SLAs offer advantages for both customers and service providers:
For Customers
- Clarifies service expectations
- Holds providers accountable
- Allows for financial penalties
- Sets standards for provider communication and responsiveness
- Establishes escalation procedures
For Providers
- Encourages internal process review and improvement
- Creates performance standards for staff
- Lays out clear security protocols
- Provides a framework for customer communication
- Minimizes disputes through agreed metrics
Overall, SLAs play a critical role in aligning stakeholder expectations and formalizing service relationships. As outsourcing, cloud services and complex IT ecosystems continue evolving, detailed SLAs will remain an essential business practice.
Hopefully this guide provided you with a helpful overview explaining the meaning of SLA and describing how service level agreements work. Key takeaways include:
- SLAs are contracts defining service standards between a provider and customer
- They outline services, metrics, roles and responsibilities
- SLAs types include customer-based, service-based and multilevel
- SLAs establish clear performance objectives and accountability
- Proper metrics and KPIs are crucial for evaluating service quality
- SLAs offer protections and process clarity for both parties
As IT environments grow more complex, having structured SLAs in place will remain critical for minimizing risk and aligning stakeholder expectations. Taking the time to thoughtfully develop SLAs with well-defined terms, service levels and metrics can pay dividends through improved service delivery and customer relationships.
Who needs a service-level agreement?
SLAs are thought to have originated with network service providers but are now widely used in a range of IT-related fields. Some examples of industries that establish SLAs include IT service providers and MSPs as well as cloud computing and internet service providers (ISPs).
Corporate IT organizations, particularly those who have embraced IT service management, enter SLAs with their in-house customers — users in other departments within the enterprise. An IT department creates an SLA so its services can be measured, justified and compared with those of outsourcing vendors.
What is a service-level agreement (SLA)?
A service-level agreement (SLA) is a contract between a service provider and its customers that documents what services the provider will furnish and defines the service standards the provider is obligated to meet.
A service-level commitment (SLC) is a broader and more generalized form of an SLA. The two differ because an SLA is bidirectional and involves two teams. In contrast, an SLC is a single-directional obligation that establishes what a provider can guarantee its customers at any given time.
What is a Service-Level Agreement (SLA)?
What is a service based SLA?
Service-based SLA: An agreement for all customers using the services being delivered by the service provider. For example: A mobile service provider offers a routine service to all the customers and offers certain maintenance as a part of an offer with the universal charging. An email system for the entire organization.
What is a service-level SLA?
A service-level SLA is a contract that details a defined service that is provided to multiple customers. If a provider offers a product with the same level of service and support regardless of the customer, they might use a service-level SLA.
What is an example of a SLA?
For example, your SLA might specify that a provider’s service will be available for a minimum of 99.5% capacity for a specific 12-hour window each day. If you have an ecommerce platform that receives orders around the clock, an SLA that guarantees availability of 99.99% for 24 hours a day would be more appropriate.
What is a corporate-level SLA?
Corporate-level SLA: Covering all the generic service level management (often abbreviated as SLM) issues appropriate to every customer throughout the organization. These issues are likely to be less volatile and so updates (SLA reviews) are less frequently required.
