Service Level Agreement (SLA)

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A service level agreement (SLA) is a contract between a service provider (either internal or external) and the end user that defines the level of service expected from the service provider. SLAs are output-based in that their purpose is specifically to define what the customer will receive. SLAs do not define how the service itself is provided or delivered. The SLA an Internet Service Provider (ISP) will provide its customers is a basic example of an SLA from an external service provider. The metrics that define levels of service for an ISP should aim to guarantee:

  • A description of the service being provided – maintenance of areas such as network connectivity, domain name servers, dynamic host configuration protocol servers
  • Reliability – when the service is available (percentage uptime) and the limits outages can be expected to stay within
  • Responsiveness – the punctuality of services to be performed in response to requests and scheduled service dates
  • Procedure for reporting problems - who can be contacted, how problems will be reported, the procedure for escalation, and what other steps are taken to resolve the problem efficiently
  • Monitoring and reporting service level – who will monitor performance, what data will be collected, and how often as well as how much access the customer is given to performance statistics
  • Consequences for not meeting service obligations – may include credit or reimbursement to customers, or enabling the customer to terminate the relationship.
  • Escape clauses or constraints – circumstances under which the level of service promised does not apply.[1]

Key elements typically included in an SLA are:

  • Scope of Services: A detailed description of the services to be provided and their expected performance levels.
  • Performance Metrics: Quantifiable measures used to evaluate the quality of service, such as uptime, response time, and repair time.
  • Customer Duties: Specifications of the customer's responsibilities, which may affect the provider's obligations.
  • Performance Reporting: Details on how performance will be tracked and reported, including frequency and report format.
  • Problem Management: Procedures for addressing service issues, including response times, escalation processes, and complaint resolution mechanisms.
  • Service Availability: Definitions of service availability, including scheduled maintenance times that are excluded from uptime calculations.
  • Penalties and Remedies: Consequences for the service provider failing to meet service obligations, which can include credits or refunds to the customer.
  • Confidentiality and Security: Obligations to protect sensitive data and ensure the security of the customer's information.
  • Termination Terms: Conditions under which the agreement can be terminated by either party.

SLAs play a critical role in maintaining a transparent, trusting relationship between service providers and their customers, setting clear expectations, and providing a framework for understanding and measuring service performance.

Service level agreements are also defined at different levels:

  • Customer-based SLA: An agreement with an individual customer group, covering all the services they use. For example, an SLA between a supplier (IT service provider) and the finance department of a large organization for the services such as finance system, payroll system, billing system, procurement/purchase system, etc.
  • Service-based SLA: An agreement for all customers using the services being delivered by the service provider. For example:
    • A mobile service provider offers a routine service to all the customers and offers certain maintenance as a part of an offer with universal charging.
    • An email system for the entire organization. There are chances of difficulties arising in this type of SLA as the level of the services being offered may vary for different customers (for example, head office staff may use high-speed LAN connections while local offices may have to use a lower-speed leased line).
  • Multilevel SLA: The SLA is split into different levels, each addressing a different set of customers for the same services, in the same SLA.
    • Corporate-level SLA: Covering all the generic service level management (often abbreviated as SLM) issues appropriate to every customer throughout the organization. These issues are likely to be less volatile and so updates (SLA reviews) are less frequently required.
    • Customer-level SLA: covering all SLM issues relevant to the particular customer group, regardless of the services being used.
    • Service-level SLA: covering all SLM issues relevant to the specific services, in relation to this specific customer group.[2]

See Also

A Service Level Agreement (SLA) is a formal document that defines the level of service expected from a service provider by a customer. SLAs are crucial components of any vendor contract, especially in the IT sector, where services like cloud computing, managed IT services, and telecommunications are often involved. These agreements outline the metrics by which service is measured, as well as the remedies or penalties should agreed-upon service levels not be achieved.

  • IT Service Management (ITSM): Discussing the overall discipline focused on managing IT services to meet business needs, within which SLAs play a key role.
  • IT Infrastructure Library (ITIL): Covering the set of best practices for delivering high-quality IT services, including the definition and management of SLAs.
  • Operational Level Agreement (OLA): Explaining the internal agreements that support the SLA commitments by outlining the responsibilities of internal support groups.
  • Key Performance Indicator (KPI): Discussing the specific metrics used to measure service performance against the standards outlined in SLAs.
  • Service Catalog: Describing a structured document of IT services available to customers, often including information from SLAs.
  • Incident Management: Covering the processes for quickly restoring normal service operation while minimizing negative impact on business operations, as defined in SLAs.
  • Problem Management: Explaining the process aimed at identifying and managing the root causes of incidents to prevent future occurrences, often referenced in SLAs.
  • Change Management: Discussing how changes to IT services and infrastructure are managed in a controlled manner, impacting SLA fulfillment.
  • Service Continuity Management: Covering the planning and management to ensure that IT services can recover and continue after serious incidents, as promised in SLAs.
  • Quality Assurance (QA): Explaining the processes for ensuring that the quality of IT services meets the required standards, directly related to SLA monitoring.

Exploring these topics can help readers grasp the comprehensive role of Service Level Agreements in the context of broader IT service management and delivery frameworks, highlighting their importance in ensuring high-quality service delivery and customer satisfaction.


Further Reading