WHAT IS A SERVICE LEVEL AGREEMENT (SLA) ? WHY DO YOU NEED IT ?
SLA stands for Service Level Agreement. It refers to a contract that outlines a commitment between a service provider and a client, including details of the service, the standards the provider must adhere to, and the metrics to measure the performance.
Normally, IT companies frequently use service-level agreements. These contracts ensure customers can expect a certain level or standard of service and specific remedies or deductions if that service is not met.
Are SLA’s really needed ?
Yes, SLA’s are indeed extremely important. Service providers often need SLAs to help them manage their customer expectations and define the severity levels and circumstances under which they are not liable for outages or performance issues . On the other side,the customers can also benefit from SLAs because the contract describes the performance and characteristics of the service — which can be compared with other vendors’ SLAs — and sets forth the means to set right the service issues. Also, in the SLAs, the service providers will also establish the general terms and conditions in which they will work with the customers . The metrics will also be defined to measure and compare the performances of the service provided . The various services that the service provider will provide is also typically mentioned in the SLA.
In short, the SLAs sets the expectations for a service provider’s performance and also establishes penalties for missing the targets and, in some cases, bonuses for exceeding them. Thus, by having a well-defined SLA, vendors can offer their clients transparency, address concerns, and describe a high level of service .
What ARE THE MAIN THINGS TO INCLUDE IN A SLA?
SLAs can vary across different types of industries and services provided. However irrespective of the industry and service providers, a typical SLA will consist of the following details :
- Agreement overview
- List of stakeholders
- Goals of the various stakeholders
- Description of the services
- List of services excluded from the contract/agreement
- Conditions of cancellation
- Service performance metrics
- A plan if the plans aren’t reached
It’s a great idea to create a basic SLA template and keep it handy, whether you are hiring a vendor or are a vendor offering your services. That way, you can be prepared for any business situation and tailor the template to the needs of stakeholders.
What HAPPENS IF THE AGREED-UPON SERVICE LEVELS AREN’T MET ? ARE THERE ANY PENALTIES ?
SLAs also include agreed-upon penalties in the event a service provider doesn’t meet the agreed-upon service levels. These could be fee reductions or service credits against the fees incurred by the customer, as well as termination of the contract for repeated failures!
- Service availability. Includes factors such as network uptime, data center resources and database availability. Penalties should be added as deterrents against service downtime, which could negatively affect the business.
- Service quality. Involves performance guarantee, the number of errors allowed in a product or service, process gaps and other issues that pertain to quality.
- Financial penalties. Requiring the vendor to reimburse the customer the amount of damages agreed upon in the contract.
- License extension or support. Requires the vendor to extend the term of the license or offer the customer additional support without charge. This could include development and maintenance.
These penalties must be specified in the SLA or they won’t be enforceable. In addition, some customers may not think the service credit or license extension penalties are adequate compensation as they may question the value of continuing to receive the services of a vendor that is unable to meet its quality levels.
Consequently, it may be worthwhile to consider a combination of penalties, as well as include an incentive, such as a monetary bonus, for work that is more than satisfactory.
CAN A SLA BE REVISED ?
Yes, an SLA can and should be updated so as to make sure that every party involved in the project should not feel as if they are short-changed . A SLA should be updated and reviewed regularly with new information . Most companies revise their SLAs either annually or bi-annually. However, the faster an organization grows, the more often it should review and revise its SLAs.
Knowing when and when not to make changes in an SLA is a key part of managing the client/service provider relationship. The two parties should meet on a set schedule to revisit their SLA and ensure it’s still meeting the requirements of both parties.
The following is the scenarios in which a SLA should be updated or revised :
- When the customer’s business requirements have changed
- If there’s a change in workloads
- If measurement tools, processes and metrics have improved
- When the service provider stops offering an existing service or adds a new service
- When the service provider’s technical capabilities change
