What’s in an SLA anyhow?

Service Level Agreements (SLAs) are an essential part of any business relationship where services are provided. An SLA is typically part of a broader master services agreement (MSA) which is provided either as part of the overarching agreement or as an attached schedule.

This document will generally provide a definition around the quality of services which can be expected to be delivered to the client. This will commonly include metrics which will be used to measure performance. SLAs can vary greatly in scope and complexity depending on the services being provided, but will generally share a common goal: to set clear expectations and ensure that both parties are on the same page about the level of service that will be provided. In this blog post, we will dive deeper into what SLAs are, how they work, and why they are important for both service providers and their clients

Types of SLA…

There are a range of SLAs which can be provided. This post will attempt to discuss the most common types of SLAs which can be provided by service providers:

1. Availability SLA: This type of SLA focuses on ensuring that the service is available for use during a specified percentage of time, such as 99.9% uptime.
2. Performance SLA: This type of SLA focuses on the performance of the service, such as the response time for a web application or the speed of data transfer.
3. Resolution SLA: This type of SLA focuses on the time it takes for the service provider to resolve any issues that may arise.
4. Customer Support SLA: This type of SLA focuses on the quality of customer support that the service provider will provide to the client, such as response times for support tickets.
5. Security SLA: This type of SLA focuses on the security of the service, including measures to prevent data breaches and other security incidents.

These are just a few examples of the types of SLAs that can be provided. The specific SLA that is used will depend on the service being provided and the needs of the client. The goal of any SLA is to establish clear expectations and ensure that the service provider is delivering the level of service that the client requires.

What happens if vendors do not meet their SLA commitments?

SLA penalties are financial consequences that service providers may face if they fail to meet the commitments laid out in the SLA. Here are a few common types of SLA penalties that may be included in an SLA:

1. Service Credit: Service credits are typically used when the service provider fails to meet the uptime or availability requirements specified in the SLA. A service credit is a percentage of the service fees that the provider agrees to credit back to the client for each hour of downtime that exceeds the agreed-upon limit.
2. Performance Credits: Performance credits may be used when the service provider fails to meet performance metrics, such as response times. Like service credits, performance credits are a percentage of the service fees that the provider agrees to credit back to the client.
3. Liquidated Damages: Liquidated damages are a fixed amount of money that the service provider agrees to pay if they fail to meet specific SLA requirements. This type of penalty is typically used for more critical services and is often used when downtime or performance issues can have significant financial consequences for the client.
4. Termination: In some cases, the SLA may include a clause that allows the client to terminate the agreement if the service provider fails to meet certain SLA requirements. This type of penalty is usually reserved for the most severe breaches of the SLA.

What should you think about when negotiation an SLA?

Negotiating a Service Level Agreement (SLA) can be a complex process, but there are several key factors that both parties should consider to ensure that the SLA meets their needs. Here are a few things to think about when negotiating an SLA:

1. Scope of the SLA: The first thing to consider is the scope of the SLA. This includes defining the specific service being provided, the metrics that will be used to measure performance, and the responsibilities of both the service provider and the client. It’s essential to define these parameters clearly to avoid confusion or misunderstandings later.
2. Service Level Objectives (SLOs): SLOs are the specific goals that the service provider agrees to meet in the SLA. When negotiating the SLA, both parties should agree on realistic SLOs that are achievable and meet the needs of the client.
3. Penalties and Remedies: As discussed earlier, SLAs typically include penalties for the service provider if they fail to meet the SLOs. The client should ensure that the penalties are significant enough to motivate the service provider to meet the SLOs, but not so severe that they could harm the relationship between the parties.
4. Reporting and Monitoring: The SLA should specify how the service provider will report on its performance and how that performance will be monitored. Both parties should agree on the frequency and format of these reports to ensure that they meet the needs of the client.
5. Renewal and Termination: The SLA should also specify how it can be renewed or terminated. Both parties should agree on the notice period required for termination and any associated fees.
6. Communication: Clear communication is crucial to the success of any SLA. Both parties should agree on the preferred method of communication and the points of contact for each party.

Negotiating an SLA can be a time-consuming process, but it’s essential to get it right to ensure that the service provider meets the needs of the client. By considering these factors and working together to establish clear expectations, both parties can enter into an SLA with confidence that it will benefit them both.

In conclusion, SLAs are a fairly common practice in the service industry. It is important to note, that the vast majority of SLAs within industry will focus around availability and first response (versus resolution) as these are the easiest to acheive. Defining good SLOs and success criterias are critical for underpinning a high-quality SLAs. It is important to ensure that these metrics properly identify what a comprehensive ‘fit-for-purpose’ systems looks like to accomplish the best outcomes for both parties.

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