What is a service level agreement (SLA)?
A Service Level Agreement (SLA) consists of many service commitments. It is an essential part of a contract to outsource software development or software support between two or more parties, specifying the duties and the quality and type of service a company would provide for a fee to a customer.
What Are The Key Components Of An SLA agreement?
- Service: the benefits provided by the vendor.
- Measurement: metrics that quantify service obligations.
- Interval: the length of time agreements are in place.
- Obligations: Some SLAs impose obligations on both the customer and the partner for the SLA to be enforceable.
- Penalty: the consequence for failing to comply with SLA obligations.
What are the 3 types of service level agreements?
- Customer-Based SLA: includes all services that a client may require while using only one contract.
- Service-based SLA: is constrained to a single, consistent service type, convenient for vendors.
- Multi-level SLA: the user includes several circumstances into a single system to produce a convenient service addressing corporate, service, and customer contracts.
Examples of service level agreements
An uptime guarantee specifies the percentage of time a service or data center is accessible, otherwise known as system or service availability. Most services offer 99.99% (four nines) uptime.
Easy access to customer support
Customers must have confidence that they have access to support personnel who respond quickly and effectively to any issue. The customer satisfaction rate is a crucial component of customer satisfaction.
This may include cybersecurity measures that protect against cyberattacks and physical security measures that restrict authorized personnel access. Two-factor authentication, gated entrances, cameras, and biometric authentication are possible physical security measures.
Turn Around Time
This is the mean, average, or maximum Time required to complete an activity. A sample SLA for a delivery service promises customers a two- to three-day average delivery window and refunds if deliveries exceed five days.
SLAs and Reliability
Reliability asserts that a system will meet specified performance standards and produce the desired output within a time frame, reducing the frequency of failures. A cloud service may be available with an SLA of 99.9 percent in a business scenario.
Still, cyber-attacks can cause IT outages making the service unavailable for several days, making it less likely that the IT service will be available when needed.
A tweet by Opsani addresses this issue:
10 Reasons Why Service Level Agreements Are Important
Businesses are increasingly outsourcing to cut overall labor costs such as employee overhead, technology, and equipment. Below are ten reasons you need a Service Level Agreement (SLA):
1. Sets clear guidelines and standards
Service level agreements help establish and state the guidelines and standards expected of the outsourced company or service provider, allowing them to move forward with a clear understanding of their expectations during the period covered by the SLA.
By establishing an SLA, you, as a business owner, state your company’s desires and needs that you expect the service provider to meet and the expected level of an expatriate.
2. Good for everybody
When drafting an SLA, the best interests of the service provider and service consumer are at the center of discussion. SLAs benefit both companies by clearly stating what the business owner expects from the service provider in terms of the service provider’s amount and level of service to the service-consuming company.
3. Helps measure service quality
A company is always concerned about the quality of service to its customers. SLAs establish the level of service quality that your company expects from a service provider. Service providers are accountable for the quality of their work and must meet your company’s expectations.
This responsibility ensures a long-term business relationship, which forces service providers to provide high-quality service to maintain a long-term relationship with your company.
4. Supports conflict resolution
In a conflict, an SLA can help resolve such a dispute, and this is because it specifies the obligations of the outsourced company or service provider and the duration of the agreement. The two companies’ signatories could also attest to the agreement, making the SLA an excellent way to solve a conflict.
5. Improves communication
Business owners should endeavor to renegotiate their SLA after a certain period to account for changing requirements and other demands that may arise. Over time, this renegotiation improves communication between the company and the service provider, assisting both the company and the service provider in understanding each other’s requirements and the scope of services they provide.
6. Aligns expectations with service providers
Signing a service level agreement with a service provider communicates your company’s expectations to the service provider in clear terms. It also lets the service provider know what your company expects from them during the SLA period.
A service level agreement also keeps the service provider up-to-date on any changes your company may want to make due to growth or other changes in your company, providing the service provider with a new set of expectations as a result of these changes.
7. Positively impacts customer service
Customer service will improve since a service level agreement exists between your company and a service provider, and they will adhere to the terms agreed upon and signed in the SLA. Customers’ feedback is essential to your company, so it is vital for you to know how they feel after dealing with your company.
Customer satisfaction is necessary, and an SLA between your company and a service provider will ensure high performance from a service provider, which will eventually increase customer satisfaction.
8. Assigns responsibility
A good service level agreement assigns roles to your company and the service provider, stating responsibilities to be covered by the service provider and those anchored by your company, ensuring that the service provider understands and abides by their duties as stated in the SLA.
This allows your company to focus on the responsibilities that need to be covered to improve customer satisfaction while also setting boundaries for the service provider.
9. Provides peace of mind and protection
A service level agreement provides peace of mind to both parties involved. It divides responsibility between your company and the service provider involved, allowing you to rest assured that the service provider is meeting some responsibility and risk cost management.
An SLA also protects your business if a service provider fails to provide the agreed-upon services. You can mitigate some of the consequences by requiring compensation from your service provider.
10. Documents procedures
An SLA defines the quality and type of service a service provider will provide. It also clearly states procedures for performing specific tasks or functions and operations to be followed if something goes wrong, such as the service provider underperforming on their services.
A service level agreement outlines the actions that are expected of a service provider in a document that is signed by your company and the service provider involved. If the need for clarification arises in the future, this SLA document can be referred to.