Service Level Agreement (SLA): An Overview

A signed arrangement between a customer and a service provider is a service level agreement (SLA). The services include the availability, quality, and responsibilities agreed upon between the client and the service provider. The documents of both parties of SLA are usually required to deal with the agreement.

It acts as an important document between the service provider and the client, with steps and penalties that apply to the service provider when they fail to provide the services specified in the SLA. This article will provide a detailed guide on SLA.

Types of Service Level Agreement

There are three types of SLAs and here they are:

• Customer SLA

Customer SLA refers to meeting the needs of a specific customer. Depending on the deal, it can differ between a group, an individual, or a company. This SLA is built between a customer and their service provider. The services differ from customer to customer, so the service provider makes a fresh and unique SLA for each customer.

• Service SLA

Service SLAs are similar for each customer and depend on whether the customer wants to enter an agreement or reject it. It is built by companies or businesses for the services they provide to a range of customers. The company won't change its services under this agreement in any circumstances, irrespective of the customer.

• Multilevel SLA

When the services are being offered to various clients or more than one service provider is giving out the services, it is known as a multilevel SLA. The services may differ for each level of customer, and there will be different rules set and applied to the SLA. It includes various layers when addressing a customer’s requirements.

Benefits of Service Level Agreement

There are numerous benefits of an SLA. Here are some of the benefits as follows:

• Customer Service

It provides a way to know how the service provider is going to support and meet the customer's expectations and what the customer should do to receive the support. Its main purpose is customer satisfaction.

• Conflict Resolution

SLA provides a plan for resolving issues and addressing disruptions in various ways, which helps avoid conflict between the parties.

• Accountability

It builds obligations and responsibilities for both parties, the customer and the service provider, and ensures accountability.

• Legal Protection

SLAs ensure legal protection for the customer and service provider by processing and mitigating disputes, imposing conditions, and clearly defining the parties involved' expectations and responsibilities.

• Facilitates Communication

It ensures proper communication between the service provider and the client, which helps in resolving any issues and reduces misunderstandings between the parties.

How to Write an SLA?

Here is how to write an SLA efficiently:

• Look at Your Current Service Levels

You need to ensure what kind of services are already being used and how well they are working. After using an SLA agreement, you need to think about the current service situation and figure out how to set the standards and goals for different services. Write an SLA for each vendor and set your standards accordingly.

• Decide What You Want to Do

You need to think about the services you want from your new contractors and analyze your current service with the current contractors. If the service level is higher than currently available, you need to figure out the standards and what needs to be done. Ensure the service provider’s name is in your final SLA agreement before signing it.

• Decide the Type of Contract You Want to Make

After deciding what you want to do, think about the format for the agreement which will help you meet your goals. You can use a similar SLA service template for every vendor agreement when working for a company. Choose your format and template carefully which will align with your needs and work best for you.

• Find Out the Level of Service

Next, you need to figure out the service level after looking at the format and your current service situation. Consider your future goals and how much service you need for it. This includes how small or big it is, when the service will be done, or why it's there. The companies might give an overview of what can happen if the service is cut off or delayed.

• Describe the Terms of the Agreement

Once you have established the level of the service, set the terms and conditions of the agreement. Explain the role of each party and what are they supposed to do under the SLA. It includes the length of the agreement, important exceptions, and the service provider’s responsibilities. You should also talk about what the other party should expect when writing the agreement.

• Make Sure You Know What to Do

Think about the measuring metrics after knowing the service scope and its level, along with the terms of the agreement. Some companies have a clear idea of their service levels, what type of service must be done, and what is acceptable.  You may use Key Performance Indicators (KPIs) and link them to the SLA expectations.

• Outline What You Expect to Get Paid

If you are a service provider always mention the cost or fees of your services and what you expect when working for a client or a company. You should talk about possible exceptions in your SLA and the fees that go with it. Your SLA must include the financial charges and details and change the contract accordingly if any issue or gap arises in the document.

• Add Appendices if Needed

You can add special terms or conditions according to your standards which may not be similar worldwide. When writing your SLA, you can add acceptable terms and the other party needs to accept the terms before signing it. It is also used when setting prices if the financial details differ from the SLA agreement.

• Make Changes and Revise

After writing your first draft of an SLA, it is essential to check all terms and conditions, if you want to add or change sections. You need to ensure all the sections are in the right order and places. When writing a document, ensure the contract is error-free as it shows authority and professionalism.

• Get the Permissions Needed

The SLA contract is a deal between a customer and a service provider. It is important to receive approvals from the people involved to complete the process. When you are changing your SLA, always follow the company policies. You should stick to the rules and regulations of a company when providing services.

Essential components in an SLA

Let us discuss the key components of an SLA:

• An Overview of the Agreement: It outlines the contract’s fundamentals like the parties involved, the launch date, and the general description of the service provided.
• The Service: An SLA should include a detailed explanation of all the provided services under all the conditions as well as turnaround time.
• Provider Interpretations: This includes how the services will be delivered as if the maintenance services are offered, dependencies, operating hours, a process outline, and a list of the technologies and applications used.
• Exclusions: It provides the requirements that are not being supplied to be eliminated properly to avoid misunderstandings and any possibility of third-party involvement assumptions.
• Service Provision: The metrics for performance measurement and the performance level are established. The consultancy and client services should conclude the list of performance measures that will be used to evaluate the levels of service provided.
• Redressing: The payment should be properly defined if a supplier fails to meet the SLA contract.
• Stakeholders: The contract defines the parties involved and establishes their responsibilities.
• Security: The security measures of the service provider are all defined in the security section.
• Risk Management: The risk management procedures and the plan for the disaster recovery will be created and communicated clearly in this section.
• Monitoring And Reporting on Service: The traceability intervals, contract stakeholders, and the current functions are defined in this section.
• Termination Procedure: It will point out the circumstances under which the document can be revoked or expires and both parties should agree on the notice period.
• Signatures: Both the parties' authorized participants and stakeholders need to sign the agreement to prove their deal with every process and detail.

Who Needs a Service Level Agreement?

Any organization that provides services to its customers, needs an SLA as it is beneficial for that business. It includes internet service providers, cloud service providers, IT service providers, managed service providers, and other similar organizations.

SLA and Indemnification Clauses

Indemnification clauses state that the service provider will not be guilty of any obligation arising from the service provided and will be harmless. It addresses issues like breach of security or confidentiality. Reviewing the indemnification clauses carefully is important in an SLA to ensure they align with the organization’s needs and expectations. A service provider has a lot of options for limiting the extent of indemnifications such as consulting with a lawyer, imposing a cap on the number of indemnitees and imposing monetary boundaries on the clause, imposing deadlines, and specifying the periods when the obligation to indemnify arises.

SLA Performance Metrics

The performance metrics are used to assess and measure the performance of a service provider against the already agreed-upon level of services.

• Availability: It assesses the time the service is accessible for use and is indicated as a percentage of availability per month or year.
• Response time: It measures how quickly a service provider responds to the inquiries or requests of a customer denoted in seconds or even minutes.
• Resolution time: It calculates the time a service provider takes to solve an issue or incident of a customer and is usually expressed in hours or even days.
• Mean time to repair (MTTR): It determines the average time needed by a service provider to fix the service or system after an incident occurs and is usually represented in hours and days.
• Mean time between failures (MTBF): It measures the time intervals between failures or any incidents in a service or system and is typically indicated in hours or even days.
• Quality of Service (QoS): It evaluates the quality of the overall service which includes performance, security, and reliability, and is usually represented on a scale from 1 to 5 or 1 to 10.
• Customer satisfaction: It assesses the satisfaction level of the customers with the provided service by the service giver and is typically expressed on a scale from 1 to 5 or 1 to 10.
• Escalation time: It measures the overall time the service provider takes to escalate an incident or issue to the higher level of support or management and is typically expressed in hours or even minutes.
• Abandoned calls or transactions: It measures the number of calls or transactions of a customer that are abandoned before the completion because of long waiting times or poor service and is typically expressed as a percentage of total transactions or calls.

What is SLA in Cloud Computing?

A contract between a cloud service provider (CSP) and a client or customer that states the service level the CSP will provide is known as SLA in cloud computing. It usually includes performance, support, and availability. An SLA should be measurable and specific so both parties know what is expected. It also helps prevent any disagreements and disputes in the relationship.

Critical Elements of an SLA in Cloud Computing

Here are some critical elements of an SLA in cloud computing:

• Performance: It refers to the reliability and speed of the service provided.
• Availability: This refers to the time that the service will be available.
• Escalation procedures: It is a process to escalate issues to a higher level of support.
• Compensation: This refers to the amount the CSP will pay the customer when the service does not meet the SLA expectations.
• Support: It refers to the support level the CSP will provide such as email support or 24/7 support.

Benefits of having an SLA in cloud computing

Some benefits of having an SLA in cloud computing:

• It helps improve customer experience and satisfaction.
• It improves the overall performance of a cloud service.
• It reduces the risk of financial losses and avoids disagreements and disputes.
• It provides transparency and clarity about the service level the CSP will provide.

Penalties for Violating Service Level Agreement

Here are some types of penalties in SLA under different circumstances:

• Service credits

In case of violating an SLA, customers are awarded a non-price service credit. It allows a customer to collect debits and use them to justify the lack of service in the future.  

• Financial penalties

It is a financial reward received by the service provider or being restrained from him when he fails to ensure the performance standards in an SLA. These penalties ensure the service provider compensates the customers for the loss through lack of service.

• Termination of contract

The hardest penalty is terminating a contract, where the breach committed is important in the SLA agreement. If the service provider doesn’t maintain the standards of performance, the customers can terminate the contract.

Is an SLA Transferable?

It depends on the specific terms of an agreement to know if an SLA is transferable. Some SLAs are designed to be transferable and some are not. When an SLA is transferable, the client or the customer can transfer the rights and obligations under an agreement to the other party. It is useful when the customer is selling their business or outsourcing their IT services. If SLA isn’t transferable, the client will need to obtain the CSP’s permission before they can transfer the rights and obligations under an agreement.

Factors affecting the transferability of an SLA:

5. Specific terms of the agreement: Some of the SLAs may prohibit transfer while others may be silent on the particular issue.
5. Nature of the services: Some services that are customized to the specific needs of a customer may not be transferable.
5. Business relationship between the CSP and the customer: When the customer has a stable and long-term relationship with the CSP, they will be more likely to agree to the transfer.

Some Aspects to Keep in Mind When Transferring an SLA:

• Ensure that the new party is aware of the terms and conditions of an SLA contract.
• Make sure you get the permission of the cloud service provider before you transfer the SLA.
• Ensure that the transfer is properly documented.
• Review and monitor the new party’s performance and make sure that they are meeting the SLA terms and conditions.

When to Revise an SLA?

Let us discuss the scenarios where the service level agreement needs to be revised:

• When the workloads change you will need to revise the SLA contract.
• Changing the customer’s business requirements leads to revising the SLA.
• When measurement processes, metrics, and tools improve the SLA contract needs to be revised.
• The service provider stops providing the service or adds new terms or the service will need to revise the SLA.
• When the service provider’s technical capabilities change, new technology equipment enables the vendor to provide better and faster services.

SLA is a deal between a client and a service provider. It is an important element in any business relationship. SLA provides a plan for defining and measuring the service level a client can expect from a service provider. It helps prevent misunderstanding, build trust, and foster accountability and transparency.

SLA plays a crucial role in aligning service, and operating businesses with organizational goals; enhances efficiency, and increases customer satisfaction. Here you have learned a detailed explanation of the service level agreement. Visit Online Legal India to get company registration and related compliances. You will get professional support from the experts.