SLA : Service Level Agreement Best Practices

SLA : Service Level Agreement Best Practices

Before diving in to SLA best practices & crucial elements of service level agreement let’s understand what is an SLA and how is it important for your IT company.

SLA Stands for ?

SLA Stands for Service Level Agreement

A service-level agreement (SLA) best described as “contract between a service provider and its internal or external customers that documents what services the provider will furnish. SLAs measure the service provider’s performance and quality in a number of ways.

SLAs originated with network service providers, but are now widely used by telecommunication service providers and cloud computing service providers.

Corporate IT organizations, particularly those that have embraced IT service management (ITSM), enter SLAs with their in-house customers (users in other departments within the enterprise). An IT department creates an SLA so that its services can be measured, justified and perhaps compared with those of outsourcing vendors.

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SLA Best Practices

This question keeps concerning us a number of times when we enter into such agreements.

A properly drafted and well thought out SLA should have the following elements:

  • It will state the business objectives to be achieved in the provision of the services.
  • It will describe in detail the service deliverable.
  • It will define the performance standards the customer expects in the provision of the services by the service provider.
  • It will provide an ongoing reporting mechanism for measuring the expected performance standards.
  • It will provide a remedial mechanism and compensation regime where performance standards are not achieved, whilst incentivizing the service provider to maintain a high level of performance.
  • It will provide a mechanism for review and change to the service levels over the course of the contract.

Ultimately it will give the customer the right to terminate the contract where performance standards fall consistently below an acceptable level.

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Crucial Elements of a good SLA

Here are best 5 practices & elements for creating and fulfilling service SLAs.

1. Overall Objectives

The SLA should set out the overall objectives for the services to be provided. For example, if the purpose of having an external provider is to improve performance, save costs or provide access to skills and/or technologies which cannot be provided internally, then the SLA should say so.

This will help the customer craft the service levels in order to meet these objectives and should leave the service provider in no doubt as to what is required and why.

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2. Description of the Services

The SLA should include a detailed description of the services. Each individual service should be defined i.e. there should be a description of what the service is, where it is to be provided, to whom it is to be provided and when it is required.

3. Performance Standards

Then, taking each individual service in turn, the customer should state the expected standards of performance. This will vary depending on the service. Using the “reporting” example referred to above, a possible service level could be 99.5%. However this has to be considered carefully. Often a customer will want performance standards at the highest level. Whilst understandable, in practice this might prove to be impossible, unnecessary or very expensive to achieve.

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4. Compensation/Service Credits

In order for the SLA to have any “bite”, failure to achieve the service levels needs to have a financial consequence for the service provider. This is most often achieved through the inclusion of a service credit regime.

In essence, where the service provider fails to achieve the agreed performance standards, the service provider will pay or credit the customer an agreed amount which should act as an incentive for improved performance.

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5. Critical Failure Service credits

Critical Failure Service credits are useful in getting the service provider to improve its performance, but what happens when service performance falls well below the expected level?

If the SLA only included a service credit regime then, unless the service provided was so bad as to constitute a material breach of the contract as a whole, the customer could find itself in the position of having to pay (albeit at a reduced rate) for an unsatisfactory overall performance.

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SLA Best Practices: Infographics

Service Level Agreement Best Practices
Service Level Agreement Best Practices

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SLA Related FAQs

What is SLA stands for?

Service-level-agreement is a contract between a service provider and its customers that documents what services the provider will furnish. SLAs measure the quality of the performance of a service provider in a number of ways.

What are the types of SLA?

There are three types of SLA: Service-based SLAs, Customer-based SLAs, Multi-level or Hierarchical SLAs

Why is SLA important?

There are many benefits of SLA but the most important is that SLA set the boundaries and expectations for the following aspects of data center service provisioning. Also, SLA drives an internal process by setting a clear, standard of performance.

What are the benefits of service level agreement?

Benefits of SLAs: Enhance customer service, Facilitates communication, Mutually accepted, Describes procedures, The SLA can be used as a written reference between any disagreements, Helps in setting standards for service.

What are the key components of service level agreement?

Agreement Overview, Goals and Objectives, Stakeholders, Periodic Review, Service Agreement, Service Management

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