What is a Service Level Agreement?
A Service Level Agreement (SLA) is an agreement between two or more parties, where one is the customer and the others are service providers. As the name suggests, it is an agreement that defines the terms of the service being offered to the customer. An SLA may address several areas including the availability of the service, the performance of the service, how it will operate, priorities, responsibilities of involved parties, guarantees, warranties, etc..
Some of the most common users of Service Level Agreements would be for telecom companies, IT service providers, Internet Service Providers and Outsourcing.
Service Level Agreements can be defined at different levels as follows:
- Customer Based SLA: This is an agreement covering all the services used by an individual customer group. For example, an SLA between an IT service provider of financial services and the finance department of an organization.
- Service Based SLA: This is an agreement between all the customers using a particular service and the service provider. For example, an SLA between an Internet Service Provider and all the customers using that particular internet service.
- Multilevel SLA: Multilevel SLA is split into three levels, each addressing different sets of customers for the same services, in the same SLA:
- Corporate Level: It covers all the issues which are same for the entire organization. For example, Security SLA’s at the organizational level. Every employee needs to have an entry card with imprinted photograph and signature.
- Customer level: It covers all issues specific to a customer. For example, the security requirements of the finance department in an organization are higher than the other departments.
- Service Level: It covers all issues relevant to a specific service. For example, the email services of a particular department, say management, needs encryption and secure backups.
Who needs a Service level agreement?
SLA’s were originated with network service providers, but with the progressing world, they are now used in other fields as well. SLA’s are now used by IT service providers, managed service providers and Cloud computing service providers. Also, corporate IT organizations that have incorporated IT Service Management (ITSM), enter SLA’s with their in house customers (users in other departments within the enterprise). The main purpose of SLA’s for an IT department is to compare its services with those of outsourcing vendors.
Service Level Agreement is considered to be one of the foundational agreements by the service provider with the customer. Service providers also establish a master service agreement with the customer to establish the general terms and conditions. Between the two agreements, SLA adds greater specificity regarding the services provided.
Why you should have a Service Level Agreement?
A good SLA is crucial for the business. It defines the boundaries for the following aspects:
- Customer commitments: A SLA agreement defines the commitments made to and by the customers, thereby reducing any chances of disappointing customer.
- Key performance indicators for the customer service: A SLA has well defined indicators for the customer service. Keeping a track of this, service providers can keep a check on customer satisfaction.
- Key performance indicators for the internal organizations. By having proper indicators for the internal organizations, the internal objectives of the service providing company become clearer and easier to measure.
- The price of non conformance: SLA specifies customer rights and penalties in case of non-performance. By having defined penalties, the relationship between the customer and the service provider remains clear and positive.
What should be included in a SLA?
A properly drafted SLA should have the following information:
- An introduction to the SLA, what does this agreement propose
- Business objectives to be achieved in the provision of services
- The service deliverables, what service this SLA supports and details of the service
- Mutual Responsibilities, who’s responsible for what part of the service
- Scope of SLA
- Applicable service hours, from what time till what time is the service available according to the agreement
- Ongoing reporting mechanism for measuring the expected performance standards
- Service availability, how much is the service available during the service window and outside of the service window
- Reliability
- Customer support arrangements
- Contact points and escalation, a communication matrix
- Service performance
- Security
- Costs and charging method used
- Right to terminate the contract by the customer where performance standards fall consistently below an acceptable level.
Common mistakes in a Service Level Agreement
- Service provider drafting the Service Level Agreement.
The customer should also play a vital role in the drafting of the SLA. It should be made by the common consensus of both the parties.
- Leaving Service Level Agreement to be a last minute job
Preparation of SLA should take priority and should be worked upon at the start of the process. The last minute drafting of SLA might lead the service provider to revise the price upwards.
- Customer expecting unrealistically high level of service performance
Absolute perfection in all the services should not be the aim, instead, most important service levels should be prioritized. Expecting unrealistically high level of service may lead to an increase in price (many a times impossible also), since it has to be a mutually beneficial relationship.
- Including too many detailed service levels
If too many detailed service levels are included in the SLA by the service provider, it can reduce the efficiency as many people will be required to effectively monitor it, which can be very costly and sometimes unrealistic.
- Having long service level measurement periods
If according to SLA, measurement of performance is done over a long period of time before any right to complain arises, this may lead to dissatisfaction of the customer.
- Exclusion of the right to terminate the contract
The right to terminate the contract for critical failure should be included in the SLA.
Why you should hire a lawyer for drafting a Service Legal Agreement?
People often wonder why they should spend money hiring a lawyer to draft a SLA, since due to the advent of technology, it is very easy to find sample SLA’s with a click of a mouse button.
It is high time to realize that a well drafted SLA is very important for the business and for business relationships. A SLA provides the basic information about the services being offered. A lawyer can help draft a SLA specific to the situation that takes into account how courts interpret agreements, how laws regulate contracts, and what standard business practices are in the community. A lawyer has the experience to predict problem areas and draft the SLA to avoid such problems.
When a lawyer drafts SLA’s, he will take into consideration, the interests of the service provider. He will include sections that protects the company’s intellectual property. He will help in specifying the terms clearly, so that there is no discussion when receiving the services.
A lawyer will make sure there are no loopholes in the SLA. Loopholes may arise by using the wrong terms in the contract
Also, a lawyer will make sure that the SLA is updated to new terms and regulations of the law. They will always know the legislative changes which appear and make sure that the contract is updated accordingly.
Do you need help in finding a lawyer to draft your Service Level Agreement?
Now you are well aware that to have a healthy business and smooth transactions, you need a reliable SLA enforced by the law. By hiring a lawyer to draft your SLA, you make sure that:
- Your interests are protected
- You evade loopholes
- All paperwork is up to terms and regulations
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