Introduction
SLA ( service level agreement) refers to a contract between the customer and the service providers. That kind of agreement is legally binding to the parties. In some cases, it can be informally formatted.
The service level agreement is made between an individual or organization, or in some cases, it is made within the same organization’s teams. The common thing in the SLA is that one contracting party agrees to provide services on specific terms.
Service level agreements cement a measurable standard between the service provider and buyers to agree upon providing specific services and upholding supplies.
Generally, the service level agreement is used in IT companies. Through the service level agreement, the service provider ensures that their customers have a certain level of all standards of services that they expect from the service provider. The service provider also mentions the clause of remedies customers can claim if the SLA does not meet the terms. This type of agreement is made between the companies and the supplier and, in some cases, can be made between the departments within the company.
What is the definition of a service-level agreement?
In simple terms, we can define the service level agreement as a level of service that the customer expects from the vendor. SLA is also defined as if the standard-level services are not provided by the vendor, such as not fulfilling the laid out of the metrics. Then there are remedies or compensations imposed on the vendor based on the terms and conditions of the agreement.
Importance of the service level agreement(SLA)
The forming of a service-level agreement is no different from the forming of other contracts. However, there are some important which are given below;
- Through the service level agreement, the service provider ensures commitment to the customer to provide specific services.
- It is also helpful for the service provider because they include terms and set up a framework of the agreement. This framework helps them to prevent providing those services to the client that are based on unreasonable grounds.
- To make a complete and standard service level agreement the following terms must be followed.:
- The contracting party must outline the obligation between them.
- They must agree upon the quality standard of the services.
- That agreement also allows the contracting party to claim compensation when the service standard cannot met for the terms of the service level agreement.
Purpose and benefits of SLA
The service level agreement has some benefits that we described below;
Protecting the legal rights of the contracting parties
The service level agreement outlines the terms and conditions that the parties are agreed upon. That’s why if any of the parties does not fulfill the filled obligation towards the service level agreement, the other party will have a right to terminate such agreement. In this way, the service level agreement Protects the rights of the parties involved.
Setting up the quality standard of the services
SLA defines the specific standard of the quality of services, which is agreed upon by a party who signs the agreement. The contracting party wants to stay within that standard of the quality of services.
Instance, the Transporter who provides the transport service will be answerable for providing transport within the period, which is expected by the client according to the service level agreement.
Specifying the exception situations
Sometimes, it happens that due to an uncontrollable situation, the vendor is not able to provide the services. For example, acts of god, natural disasters, temporary downtime, Lockdowns, etc. In that situation, some related clauses must be included in the SLA. That clause helps to protect the rights of the contracting parties.
Enhancing service quality
The service level agreement plays a significant role in the business world. It acts as an essential tool by providing service and helping the business organization to achieve its goals. This way, the vendor by the SLA provides specific quality standard service to the companies within the response time. As a result, the company can receive these services without interruption and enhance their productivity. SLA builds a framework that helps the organization enhance workflows and maximum customer satisfaction.
Building customer trust and loyalty
Customers become more loyal to the service provider who provides consistent services according to the terms of SLA. The vendor providing continuous services to customers can build their trust. As a result, customers also become loyal to them.
SLA builds Legal and compliance aspects
In an SLA, a vendor should not include, only describe details and standards of the services provided. But they also described the metrics through which the provided services are measured. They should also include the rights, duties, responsibilities, and the clause that if that is breached, what kind of remedies or penalties are available for the other party.
Three types of service level agreements( SLA)
Service-Based SLAs
Service-based SLA is made when the customer chooses the agreement-based services. It referred to the details of the vendor’s regular and additional services and levels. In short, we can say that it is an agreement used by the customers, who agree to receive services from a vendor. The service provider sets the service level or standard according to customers’ requirements. For example, the IT service provider provides different levels of services according to the customer’s request. The service provider prepares an SLA with details of the service to the customer.
The service level agreements will apply to specific services the customer wants to use. They may be divided into different levels, for example, service levels 1, 2, 3, etc.
The customer can select the service and the service level depending on requirements. The service provided by the vendor can be different according to the service level and customers can enjoy the services as per their requirement.
- Let’s understand with some examples,
- A mobile service provider offers services that they count as regular services. They also offer to provide some additional services, such as maintenance services, which are not a part of the regular services and will be charged according to the customer’s needs.
- An IT company Offers different types of services such as email, internet, cloud backup, IP, etc.
When to use a service-based service level agreement
A service-based SLA is often used in the IT company. This agreement ensures that the customers provide some specific types of services with a certain level or standard that they expect. Consumers also expect the level of services. If that is not provided by the service provider, in that case, remedies or deductions can apply to the vendor.
The vendor ensures the customers to metrics for the measures of the services. The SLA also ensures that if the vendor fails to provide a certain standard or level of services, they will be liable for the penalties or remedies for the compensation or deduction.
Component of service-based SLA
To make a good service-based SLA, some key components should be included, which are given below:
Sort description of the agreement
The agreement should include a sort of discretion as an involved individual part, such as effective date and expiry date, service detail, time, etc.
Goals and other objectives
This section needs to include the goals and objectives, such as the purpose of an agreement. The authority of the vendor and customer to be involved, outline the terms, etc.
Parties of the agreement
This section should include the details of the parties involved in the agreement, like the full name and address of the vendor and client.
Details of services-based
In this section, the parties are required to include the details of the services on which the agreement is built, some of which are given below:
- The scope and types of services offered and provided by the vendor, such as telecom services, Internet services, etc.
- The details of the customer’s requirement and the terms they agreed to be involved in the agreement.
- Services of areas.
- The clause of termination of the agreement and the remedies if a party fails to fulfill the terms.
Service management Claus
This section is crucial and necessary to include it in the agreement. In this section, the party mentions the details of service requirements and requests. This clause helps them to maintain the service management, such as future expectations of the client, telephonic support, email support, response time of the service request, etc.
Service description and scope of work
The service description and scope of work are a statement given to the client related to the service details, such as the nature of services, time limit, ratio of fees which is payable by the client, etc.
Performance Metrics and KPIs
SLA and KPI ( key performance indicators) are crucial factors in business management. The SLA refers to the standard or level of the services, while KPI refers to a Key performance indicator. Both of them are related to tracking a specific metric of business performance.
Availability and Uptime Commitment
The vendor ensures that the client provides a certain level of availability. The telecom company SLA ensures the client provides a specific level of network availability. They also promise their client that if they fail to provide that availability, the client can deduct some specific amount. It is the best example of the availability.
Customers expect a certain level of uptime commitment from the vendor for the related service. For example, uptime commitment will help the customer when the service project is critical. In this situation, downtime results in a negative impact on the customer’s revenue.
Support and maintenance clause
SLA is generally used in maintenance operations that ensure the customer that the vendor provides a certain level of services at a particular time with a cost-effective. For that, the vendor includes the details of response time, problem resolution time, uptime service level, etc. In this way, customer can manage their organization by using vendor services.
Pros of service-based SLA
There are some advantages that we need to know of service-based SLA, which are given below:
Provides clarity – the SLA sets more clarity for the contracting parties and outlines the expectations, responsibilities, and liabilities.
Provides a performance measurement – it provides performance measurement metrics for the quality of services, which helps to maintain the standard of service level.
Legal protection – SLA mentions the legal obligations of the parties involved, which helps them resolve disputes if the contract is breached.
Cons of service-based SLA
There are some disadvantages that we need to know of service-based SLA which are given below:
Complexity – Sometimes, the SLA leads to complexity. The vendor is required to continually provide certain types and levels of service to the customers as per their expectations. That may create confusion and misunderstanding between the parties.
Rigidity – Sometimes, SLA becomes inflexible when a client makes changes in the business model or due to changes in external factors. It may result in conflicts between the parties.
Overemphasis metrics – The vendor focuses on completing metrics that are mentioned in the SLA, which can lead to detractions from the overall standard of the services. That can result in a customer’s dissatisfaction.
Legal disputes – the SLA indeed protects the legal rights of the parties. But if it is not crafted and maintained, it will result in a legal dispute between the parties.
Another unique instance of an SLA is a web service issuer service-level agreement
This SLA will consist of an uptime assurance, however, it’s going to additionally outline packet shipping expectancies and latency. Packet shipping refers to the proportion of information packets that might be acquired as compared to the overall variety of information packets despatched. Latency is the quantity of time it takes a packet to journey among customers and servers.
