A service-level agreement describes the expectations one wants from a vendor. It lays out the metric by which a service is estimated, and remedies or liabilities are agreed upon. This is a critical component of any technology-related vendor agreement. SLAs are generally between suppliers and organizations, but they may be between departments too.
Why does one need an SLA?
For any IT vendor contract, an SLA is invaluable. SLA collectively puts all the services and agreed-upon expected reliability into a single document. The document explicitly states the metrics, expectations, and responsibilities. This ensures both sides of the parties have the same understanding of the requirements. There is an alignment of SLAs with the objectives of the engagement.
Who provides the SLA?
Most service providers have a standard SLA, sometimes several that reflect the pricing and services offered. These SLAs should be reviewed and modified by the legal department. Customers should provide the expected service requirements, influencing the pricing and the service provider's wants.
What are the critical components of an SLA?
An SLA should provide components in two areas: 1) Services and 2) Management.
The service elements specify the services offered and excluded. Service elements mention the conditions of the services, the time window for each service, and the responsibilities of each party. Furthermore, there is a detail of escalation procedures, and there is mention of cost/service trade-offs.
The management elements include definitions of measurement standards and the methods, reporting processing, frequency, resolution process, and a clause protecting the customer from breaches. There should also be a mechanism to update the requirement as required. This is crucial as service requirements and the vendor's capabilities change over time. This ensures SLAs are up-to-date.
Additionally, there is an inclusion of a summary of the agreement within the SLA as the first step. The summary outlines what service is delivered and to whom the service is delivered. The goals of both parties, primarily the customer, are agreed upon. SLAs should also detail each party's requirements to achieve their goals. Additionally, a point of contact is needed, and how they are needed is established.
Three types of SLAs
This service agreement is an agreement by a vendor to deliver an experience to a customer.
This service level agreement only pertains to within the company or organization. There are separate agreements between its sales or marketing departments, for example.
This supports the business’s customers and the internal departments. This SLA agreement agrees upon what is expected of each party if there is more than one service provider or end user involved.
Mistakes to Avoid
SLAs have now increased in scope with organizations as they become a way to drive operational results. Careful SLA management is key to continuing safeguarding as there is the addition of new technologies regardless of what an organization deals with in the future. Despite the emphasis on this, there are common mistakes encountered, which are damaging to IT and the organization as a whole. The following are ways to avoid such pitfalls.
1. Establishing Criteria and Agreement on an SLA criterion early on
There should be a focus on the agreement of an SLA from the start. Detailing the agreement earlier fosters a shared understanding of service delivery. Before discussing features, and the costs and benefits, prioritizing the SLA is crucial. An early establishment of SLA ensures the expectations from both sides and that these expectations are met.
2. Succinct amount of SLAs and accurate measurements of SLAs
Too many SLAs divert attention from vital services to the lesser priority ones. With too many SLAs, the importance of each one is diluted. It can make it difficult for providers to know which one to focus on.
Regarding measurements, metrics are created, which allow for adequate data collection. If a metric developed is inaccurate, then an SLA contract is unactionable. By investing time, organizations can carefully craft their meaningful SLAs. A client providing their own SLAs removes the dependency on the service provider.
Each SLA should have the following characteristics:
3. Treating SLAs as elastic
Static SLAs is a mistake. SLAs, at most, are elastic and change as businesses and technology change. An SLA should be reviewed and updated whenever a proposed change occurs. The SLA should adjust for service hours, availability, completion, or response times. Failure to update SLAs hinder improvement as targets are unattainable. This could result in loss of customers or penalties due to non-compliance. A plan should be made if goals are unachievable and conditions set which allow termination of SLAs. A form of compensation can be offered to the user when a particular service goal is unattainable. Within departments, organizations should consider how specific departments can help with lost revenue.
SLAs are a fundamental part of partnerships, especially with third-party technologies. Understanding how to structure an agreement, how to measure metrics, and how to negotiate the terms are critical aspects of businesses. SLAs, therefore, pose a significant challenge. Pursuing these documents is difficult; however, they are just as important for mitigating risks. SLAs help build trust between the organization and the customers. The agreement helps manage the expectations and allows the teams within the organization to know which issues they are responsible for. Implementing SLAs benefits internal teams as well as the organization. The ways mentioned above to manage the pitfalls are a gateway to how an SLA can be improved.