What is an SLA (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 and are part of a service contract where a service is formally defined.

An SLA agreement represents the level of service quality, availability of service, and the procedure of reporting and resolving problems that occur.

SLA sometimes refers to the contracted delivery time (of the service or performance). Companies will include service level agreements within the terms of their contracts with customers to define the level(s) of service being sold in plain language terms.

Depending on the service, some metrics to monitor SLA include service availability, defect rates, technical quality, security, business results, abandonment rates, etc.

The SLA should be reviewed periodically, especially if the client’s business needs, workloads, or technological environment have changed and if metrics and processes have improved.

What are the critical components of an SLA?

SLAs should incorporate components in two areas – services and management.

Service elements should specify provided services, conditions of service availability, standards (e.g., time windows for each level of service), responsibilities of each party included, escalation procedures, and cost trade-offs.

At the same time, management components should specify reporting processes, content and frequency, definitions of standards and methods, an indemnification clause, and a mechanism for updating the agreement as required (e.g., vendor capabilities and service requirements).

What are the types of SLA?

Three types of SLA are categorized by their specific use case: customer, service, and multi-level level.

On the customer level, SLA covers all the services customers use and need. This type of agreement includes specific details of the service provided, service availability, responsibilities, terms of cancelation, etc.

The service level includes a contract offered to multiple customers for the same service. For example, if the service provider had numerous customers using IT support, the same service-based SLA would be issued to all clients.

On the multi-level, the agreement is split into multiple levels that integrate several conditions into the same system. For example, if the service provider had numerous clients using his product at different service levels or price ranges.

What are the benefits of an SLA?

Some of the benefits of SLA include the following:

  • Improved employee experience
  • Improved customer experience
  • Increased productivity and performance
  • Organized resource allocation, established and trusted sources of information
  • Easier communication
  • Enhanced productivity

What is the difference between SLA and KPI?

Service-level agreement (SLA) is an agreement between the client and the service provider about their work together and individual responsibilities. KPI, or key performance indicator, measures people’s or group’s performance against an agreed group of standards.

Oct 10th, 2019
2 min read

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