Service Level Agreement (SLA) Overview

Prakash Matre
Prakash Matre at March 17, 2023

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Service Level Agreement

In simplest terms, Service Legal Agreement (SLA) is an agreement that states what services the service provider will provide to his/her customers/clients. Generally, SLAs are output-based, and its purpose is to define the nature and quality of service, the customers will receive. This agreement also lays out the metrics by which the service can be measured.

Types of Service Level Agreements(SLAs)

Usually, SLAs are drawn between companies and external parties. However, departments within a company can have a SLAs too.

  1. Customer-based SLA

Customer-based SLA is an agreement that defines all the services promised to be given to an individual or group of customers. This is customer-centric — for example, an internet service provider clubbing all the services in one account.

  1. Service-based SLA

A service-based SLA is an agreement that defines a specific service promised to be provided to all its customers. The focus here is the service assured to be delivered — for example, helpdesk to resolve customer tickets.

  1. Multi-Level SLA (Co-existing SLA)

Multi-level SLA is a type of agreement that can be customised as per the requirement of the end-user. This helps the user to create a suitable bundle of services by integrating several conditions into one. Here, a single SLA can be divided into different levels, and a specific set of users can be defined based on the services used. Multi-level SLAs include:

    • Corporate Level Agreement: This covers the business as a whole as the elements included here-in are generic and are typically unchanging.
    • Customer Level Agreement: This covers all service issues related to a specific group of customers.
    • Service Level Agreement: In this agreement, all the issues related to a particular service used by a class of users are exclaimed.

Perks of Having Service Level Agreements

  • No unrealistic expectations

Clients get frustrated when their expectations are not met, regardless of whether these expectations are practical or not. An exhaustive and well-formed SLA assists in dealing with the expectations by elaborating the abilities and resources of the service provider.

  • Complex issues can be simplified.

Generally, users are more interested to know how a particular service will affect them. The SLA can help in identifying and documenting the issues that currently exist, and that may arise in the future. The suggested break-through for these issues and the remedies available if the resolution received isn't sufficient or agreeable also form a part of the agreement.

Elements covered under SLA

A well-formed SLA must cover the following elements:

  • Clear definition of all the terms used
  • Period of SLA
  • Scope of SLA
  • Collective obligations
  • Communication matrix
  • Point of contact and escalation matrix
  • Financial provisions -
    • Monthly expense
    • Remuneration
    • Pattern of Invoice
    • One time expenses
    • Other recurring expenses
    • Payment period and terms
  • Non-disclosure clause
  • Miscellaneous
    • Settlement of dispute clause
    • Compensation
    • Area of authority
    • Correction and remission procedures (if needed)
    • Assent with the law
    • Warranties and guarantees

Why is Service Level Agreement Essential?

This agreement:

  • Gives exact, clear, and unambiguous data relating to the service agreed for.
  • Describes issues and their possible solutions.
  • Determines what will be the consequences if the objectives are missed.
  • Contains the list of domains where services will be provided and the exclusions.
  • Communicates the rights and responsibilities of either party.
  • Keeps the clients and service providers expectations clear.
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