A Service Level Agreement (SLA) is a formal document which the Service Provider and the user of the services mutually agree to. It defines the terms of the services expected from the service provider. It is output-based where the purpose is to define what the customer shall receive and in what manner.
A Service Level Agreement documents the arrangement between service providers and customers who are the end users. Service Level Agreement consists of the following metrics that define levels of service:
- A brief description of the services to be provided as agreed between the parties,
- Reliability and Responsivenessexpected of the service provider,
- The Deliverables and the procedure of reporting,
- Consequences for failing to meet deliverables,
- Performance indicators,
- Prioritized areas,
- Hierarchy of contacts and escalation of problems,
- Periodic Reviews
The exact metrics for each Service Level Agreement varies as per the service and the service provider, which must be provided in a specific and detailed manner. An SLA will comprise technical definitions which shall then be followed in the rest of the document.
A Service Level Agreement may form a part of a Master Service Agreement (MSA) with a Statement of Work (SOW) to support the actual scope of the work involved in the transaction.
Who uses Service Level Agreements?
SLAs are most common in the IT markets where the companies often rely on external services for smoother operations. However, there are many more business relationships which can be governed by a Service Level Agreement.
These days, popularly, the businesses outsource a wide range of services. In such cases, it is the SLA which defines the relationship between the client company and the service provider, which included logistics providers, accounting services, freelancers, consultants etc. The Service Level Agreement thus contributes to a mutually beneficial and unruffled relationship between the parties. SLAs are also very popular among internal departments in larger organizations.
What are the advantages of Service Level Agreements?
A Service Level Agreement is technical in nature and specific to the scope of services which makes it easier for the parties to stay focused on the project benefitting both the parties.
Service Level Agreements provide the performance index as well as the provisions of periodical review of the stages of the service. This ensures both parties to stay updated and on track as per the time frame decided.
Thus, Service Level Agreements help keep the parties on the same page.
What are types of Service Level Agreement?
Though SLAs are drafted as per an individual project and the services being provided, yet broadly can be categorized as follows:
- A customer service level agreement- with an external customer.
- An internal service level agreement- between the departments of the same organization.
- A vendor service level agreement- with a vendor.
The above three types can be supportive of each other in the same project.