Service-level agreement (SLA) Definition
Common in the SaaS space, an SLA, or service-level agreement is often used by service providers as a kind of contract between supplier and customer that documents the services to be provided.
Set out to safeguard both customer and provider, the SLA is bidirectional and can cover stipulations and expectations from both parties, but mostly it outlines what the service provider team can guarantee in terms of service level for the duration of any given contract or partnership.
Why are SLAs important?
An SLA should play a major role in any IT vendor and customer relationship. Outlining all the key information on the respective service, and an agreed level of reliability, the SLA is a lifeline for both parties in the event of issues and outages. An SLA highlights performance metrics and documents the respective responsibilities for customer and vendor so that there is no ambiguity or confusion on where the liability might lie should an issue arise. With an SLA, both parties clearly understand their requirements and accountabilities and are protected by simply having such a contract in place.
Customers need documented confirmation of the services they use, and for service providers, producing and signing an SLA is helpful in terms of setting expectations upfront. For suppliers, the SLA is a lifeline and allows them to outline the details of their service, highlight any liability clauses for situations such as outages, natural disasters, or performance issues, and generally allows them to set expectations.
For customers, seeing a supplier’s SLA is useful as it can help to compare the service levels of varying service providers. This can be very useful when shortlisting possible providers, or if you feel a particular vendor fell short of your expectations, SLAs are often accessible from other service providers to research possible new options. In fact, doing this can prove a powerful negotiation tool, as SLAs can be amended, and your existing vendor might be willing to move the goalposts to retain your business.
Who needs a service-level agreement?
Common use of the SLA came about because of businesses more frequently outsourcing their IT services. It’s fair to say, SLAs are most commonly used in technology related industries, but they can have a wider scope of relevance in a modern working world.
Now, businesses looking to appoint new suppliers in the cloud computing, managed services, or internet service provider (ISP) space, should expect an SLA from any potential partnership.
An SLA isn’t always laid out exclusively for an outsourced customer-supplier relationship. In larger organisations, an SLA can be used as an interdepartmental contract to outline services provider to that department. This is often the case if the business or a specific department is considering outsourcing or wanting to compare respective services.
What to consider when selecting metrics for my SLA?
Many suppliers will provide standardised SLA, or tailored templates that outline their services. When reviewing your possible vendors, it’s important to view the SLA as a starting point for negotiation. For the most part, as the vendor provides the SLA, the outcomes might lean in their favour in the event of an issue.
From the outset, it’s important to know that SLAs can be tweaked (alongside the support of your legal counsel) and tailored to your individual requirements as a customer within the capabilities of the vendor. Your SLA should be in alignment with your business objectives and should work to support your business continuity and customer experience.
For that reason, it’s important to consider the metrics you might want to use to monitor and assess the success of the partnership upfront. It might be wise to do so before even sending the request for proposal (RFP) so that you don’t waste your time, or the vendors on a level of reliability that isn’t feasible for them. For example, you might expect or need an uptime service availability of 99.999%, or a specific amount of time to rectify an outage, in which case, the vendor would have to bow out if they could not guarantee that level of service.
It’s important to think about metrics so that you can measure success and so that any foul play by either party is avoided. It’s important to think about metrics for both parties. For example, setting an uptime expectation for the vendor. Or for the supplier side; to encourage fairness, ensuring that the client knows their responsibilities and the vendor cannot be penalised for bad communication on the client’s part.
Whatever you choose to measure, you must ensure that data can be captured easily, to help you keep track of both parties and verify their commitment to the SLA. We outline some of the more specific performance measurements you might consider later in this post.
What are key components of an SLA?
There are a few components that a service-level agreement should always include. We’ve outlined the key components below:
-
Contract overview
An SLA should include a contract overview or agreement overview which briefly outlines the general content of the document. The overview should give the reader the basic, integral information included within the SLA at a glance when needed. The overview should ideally include the start date for the contract, the duration and a general overview of the services provided and specific expectations to be met.
-
Service description
The main body of the SLA should be an outline of the service to be provided. Going into more detail than in the overview, this section should include descriptions of the supplied services and should also outline service delivery times, turnaround times and any mitigating circumstances. Within this section, the supplier should also define how the service will be delivered including applications and processes used, hours of operation, maintenance inclusions and any dependencies if applicable.
-
Exclusions and caveats
The SLA must also clearly highlight any services that are not offered, or add-ons which are not included. This ensures that there can be no ambiguity, protecting both parties from any misunderstandings, false expectations, and disappointment in the long run.
-
Service performance expectations
This section is where customer expectations and metrics will be outlined. Without a steer from the customer, vendors will set out their performance levels, defining their standard performance credentials so that supplier and customer can agree on the metrics used to monitor the appropriate service levels.
-
Security
Security measures that fall within the remit of the service provider should be outlined upfront. Typically, this section should include protocol regarding relevant IT security and nondisclosure clauses.
-
Grievances and redressing
In the event of a customer being dissatisfied with the level of service, or the service levels falling short of those outlined in the SLA, compensation (such as service credit or pricing adjustments) may be provided. This should be outlined within the SLA so that both parties acknowledge what may be owed should such an issue arise.
-
Service reviewing, monitoring, and reporting
This section should outline the periodic review or minimum term processes including with any key performance indicators (KPIs) for regular review and the process for either party to make any changes in the duration of the contract. This should also outline the reporting processes and structure as well as monitoring and tracking of the service conducted by the supplier and the customer.
Types of SLA
Where the basic purpose of any SLA remains the same, there can be different types of SLA that businesses can use that depend on whether the document is targeted at individual customer groups or entire companies. We outline three key types of SLA and their uses:
-
Customer-based SLA
A customer-based SLA is often completed for individual customers of a service provider. The customer-based agreement comprises all relevant services that customer and end user might need, combined in one single contract. For example, should a customer appoint a provider for cloud-based communications capabilities, a customer-based SLA would include details of all respective services including messaging, video and phone functionality.
-
Service-based SLA
This type of agreement is a contract that outlines the levels of service delivered to its customers. Generally, this will be one identical contract, replicated and used for all a vendor’s customers, meaning it is mostly used by the type of providers that offer one single level or standardised type of service for all its clients.
-
Multi-level SLA
A multi-level SLA is a type of contract that has been tailored and edited to outline the specific needs of the customer business. These types of agreement are popular as they allow suppliers and customers to align their mutual objectives from the outset and plan for a more bespoke level of service. The agreement is called a multi-level SLA as it addresses the needs at various levels including:
- Business level- outlining the standard, unchanging terms of the service, meaning it does not require regular updating unlike other SLAs.
- Customer level- highlighting the service issues associated with a particular type of customer.
- Service level- setting out all details of a specific service associated with a particular group of customer or customer type.
SLA Checklist
When drawing up a service level agreement, it’s worth tailoring the document to your specific business requirements but having a checklist in place to ensure you’ve covered the basics is a good place to start. Here are a few of the key components for drafting up your SLA:
- Define all parties (who the agreement is between)
- Introduce the type of service
- Set out the main purpose of the agreement
- Define the key goals and objectives of the partnership
- State the duration of the service contract
- Highlight vendor’s requirements
- State the customers key requirements
- Outline processes for performance reviews
- Define the approvals and escalation procedures
- Outline the terms of termination
For a comprehensive process to help draw-up, oversee and conduct effective service management for the duration of the agreement, it’s a good idea to set-out a clear process from the start. Checklists and workflow management templates such as those by Process St might be a good starting point when setting out with a new vendor agreement.
SLA performance metrics
The main aim of an SLA is to advocate best practice in a partnership type of relationship between customer and vendor. There are a few ways to ensure you’ve covered the best metrics within your SLA to encourage the best possible service levels for your business needs.
Facilitate the right behaviour
Putting yourself in your supplier’s shoes (or vice versa) could help you to understand the type of metrics that might motivate the best possible service performance. Your service level metrics should be obtainable goals built around motivating and optimising the performance of both parties in the agreement.
Choose metrics that are easily measured
Before implementing your desired metrics, it’s critical to check you will be able to accurately measure that specific data. If you implement metrics that must be manually collated or monitored, you add work for your team, and, realistically these time-consuming processes might fall by the wayside in favour of more important tasks. Ideally you want to implement measurements of the service levels that can be captured automatically using automation and solutions that work continuously in the background as your agreed service is delivered.
It’s important to consider the baseline level of service you need from your provider and implement the key requirements. Think about the following possible metrics, whether you need them, and how you might implement a measurable goal:
- Vendor response time
- Uptime and availability
- Security
- Abandonment
- Error rate
- Service desk first call resolution
- Mean time to outage (or downtime) recovery
- Turnaround time
Is there room for negotiation on SLAs with cloud service providers like RingCentral?
With traditional service-based SLAs, vendors standardise their agreements outlining the base level of service. That means some cloud vendors are reticent when it comes to editing their SLAs, as their service is set to predictable margins for a wide range of customers.
However, while fixed metrics such as the uptime SLA may be non-negotiable, you should be able to tweak the SLA for your specific needs. Most cloud communications providers, such as RingCentral will be amenable to changes to the SLA, but it’s worth requesting changes earlier on in the process, such as at the point of purchase, or ideally at the RFP stage of your interactions. That way, both parties know what is required upfront, setting-up the agreement for a long and successful relationship with your vendor.
RingCentral offers an uptime SLA of 99.999% as well as security credentials that make us a reliable, trusted cloud service provider for businesses across the globe.
