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What is SLA? Types and Best Practices

A service level agreement (SLA) is used to define the services that will be provided to a client from a vendor. An SLA is essential for businesses outsourcing any of their technology needs and serves to outline expectations to protect both the vendor and the customer.

What is an SLA?

A service level agreement sets out the level of service that the customer expects from the vendor supplying a service. The SLA also defines any penalties or corrections that will take place if necessary. In the context of managed services, a service level agreement might promise certain levels of speed, security, and guaranteed uptime. If the promises in the agreement are not fulfilled, the client can receive compensation, such as a reduction in fees. Having an SLA is important to clearly outline all of the expectations of the service, as well as key metrics and responsibilities.

Types of SLA

There are three main types of service level agreement, which all differ slightly in how they function. These SLA types are service-based, customer-based, and multi-level or hierarchical service level agreements.

Service-based SLA

A service-based SLA is designed to cover a single service for all customers. The service level of the agreement remains the same for a particular service, regardless of who the agreement is with. So if several different clients or departments within a business are all using the service, the service-based SLA will be valid for all of them.

Customer-based SLA

A customer-based SLA is a service level agreement that defines the services used by a single customer. It sets out the services that are specific to them and are not automatically shared by other customers. The SLA covers all of the services that are provided to the customer under a single contract.

Multi-level/Hierarchical SLA

A multi-level or hierarchical service level agreement involves parts of the SLA being defined in accordance with the customer’s organization. The SLA is usually split into three levels, the corporate level, customer level, and service level, which are all covered in the same SLA.

• Corporate level – at the corporate level the SLA doesn’t require regular updates and applies to all customers in the organization
• Customer level – discussing all of the service issues that relate to a specific set of customers
• Service level – includes everything related to a particular service regarding a specific customer group

What’s Included in a Service Level Agreement?

A service level agreement typically contains a number of different things to outline the services agreed upon. It should have a description of the services being provided and the service levels that are expected. The SLA should also include the metrics that will be used to measure the service that is being provided. The duties of both the vendor and the customer should be defined, and the consequences of a breach of the SLA should also be laid out, including any penalties or remedies. An SLA should include a protocol for adding additional metrics or removing any that are no longer needed. In addition to defining services, the SLA should also define management standards and methods.

SLA Best Practices

There are several best practices for suppliers and customers to consider when creating and following a service level agreement. Following these best practices will ensure that the SLA is beneficial for both parties.

Create a Mutual Agreement

It’s important for the SLA to be created as a mutual agreement. The service provider needs to only agree to terms that they are able to deliver while meeting the needs of the customer. The aim of creating the SLA should be an agreement that both parties are satisfied with and that the supplier is able to fulfil.

Set Out the Agreement in Detail

A managed services SLA should be sufficiently detailed so that there is no confusion, and both parties know their responsibilities and duties, and what to expect. Any element that matters should be included in the agreement, outlining what may happen in any eventuality. The agreement should set out how the promised services will continue to be provided, even if something goes wrong.

Regularly Review the SLA

A service level agreement should be reviewed regularly, and any necessary changes made. As the needs of the customer change and the supplier’s operational requirements also change, it’s important to review the SLA and ensure that it remains up to date. It might need to be reviewed after changes such as software updates or restaffing.

An SLA for telecommunication services provides a clear outline for the services provided, ensuring that both parties are clear on the terms of the service.