Service Level Agreement & Why You May Need It

Have you ever happened to work with the service supplier and not to get the expected outcomes? Or maybe, the supplier was not as transparent as you wanted? Well, today, we will tell you about the agreement that solves the majority of such issues – the Service Level Agreement or SLA.

Service level agreement definition

SLA is an external document (signed between the customer and the supplier) describing the service’s parameters. “Compliance with SLA” is equivalent to the fact that the service corresponds to the parameters and values ​​of the metrics set in the agreement. Although the term first appeared in the IT-sphere, today, such documents are also used for other B2B segments, e.g., in the maintenance of commercial real estate, in the repair of specialized equipment, etc.

Service Level Agreements are actively used where the provider and the customer are autonomous to each other.

Why you may need Service Level Agreement

The hesitation of companies that haven’t worked with such a document is in vain. The SLA doesn’t bureaucratize IT or any other service department, but it formalizes and makes the interaction between the parties more transparent.

The SLA contains a description of the provided services and sets the areas of responsibility between the parties within a particular service.

The agreement also includes terms and conditions when the service is considered completed when the contractor’s liability is ceased. This means that the IT service provider doesn’t have to fix bugs in the developed system if they emerge in a year, after the expiration of the stated six-month warranty.

The document prescribes parameters for the services, and acceptable hesitations are considered as a level of SLA. E.g., You can specify that the team must respond to requests in two hours max or something else. However, if one of the parties disagrees on the conditions, it’s better to be discussed before signing the agreement and set the possible deflections so that nobody has false expectations. Essentially, the timings are not the only viable metric source. You can also set parameters and hesitations for the quantity of the performed tasks and other possible measures.

Supplier’s and client’s perspectives

From the supplier’s side, SLA contents are a set of supplier’s goal-oriented metrics (opposed to KPI, usually set by the client but often confused with SLA). If parameters are met – great, if not – it is time to figure out who’s the fault and act according to conditions also set in the agreement. It’s critical to be very cautious about the metrics and parameters because if you focus on them more than on a solution itself, you are risking ruining the project.

From the client’s perspective, SLA is also useful for setting terms, conditions, and possible deflections for inquiries. Plus, it’s possible to state penalties for suppliers if there are any violations that are not prescribed as possible deflection (so called indemnification clause).

What kind of metrics to monitor?

Depending on the provided service, metrics can vary. Some indicators can be monitored within SLA. Remember that you should set everything as simple and straightforward as possible, considering only the most critical parameters. Essentially this includes:

• Service availability. It means the amount of time when service is available. For example, if the company provides services from 9 to 5, five days a week, from Monday to Friday, it should be stated. National holidays, shorten days and other special day-offs are likely to be set as well.

• Technical quality & defects. It covers the amount and percentages of errors in major deliverables. Production failures, coding errors, time spent on their identifications, and fixing causing overtime work, missed deadlines – all of this should be monitored.

• Security. Application security breaches can cause many problems, including additional expenses. Monitoring controllable security measures is vital. Anti-virus updates, patching, security protocols, and scripting ensure that all measures were taken to prevent breaches.

If some hesitations can occur at any point, it should also be noted along with possible actions and outcomes.

How to work by Service Level Agreement

The scheme of work under the agreement is quite simple and clear:

• notify all the members of the other party’s team on the parameters of the agreement;
• do your best to comply with the metrics concerning another side;
• regularly measure the compliance of the parameters with the declared indicators;
• analyze and optimize processes within the company;
• remember that SLA can be revised from time to time (it’s even highly recommended) since the definitive agreement – is an unattainable perfection.

Please note that it is much easier to comply with the SLA if the service company’s processes are well-established.

Benefits of SLA

For client

• Measurable service metrics – you always know what you pay for;
• ability to compare reality with expectations;
• the right to get compensation if the supplier fails;
• ability to state warranty period and other conditions.

For supplier

• Ability to state your terms and conditions;
• establish processes within provided services;
• limit the area of own responsibility;
• introducing the several levels of support earning on it (e.g., get extra money for the task urgency, warranty extension etc.).

Summarizing

SLA is a reliable backup for both parties if you use it wisely: thoroughly and carefully setting all the necessary parameters and noting all the possible hesitations, terms and conditions. This agreement will especially work great if the service provider has firmly established processes within their company: which is also an excellent sign for a client.