A Service Level Agreement (SLA) is a contract between a service provider and a customer. It spells out what each party can expect from the service, and details how quickly a service team should respond to an issue, how often the service is available, and what quality standards must be met.
According to APQC, 86% of surveyed organizations have contracts that include a SLA, showing the widespread adoption of SLAs, particularly in IT-based industries.
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Key Takeaways
- Service Level Agreements define the services, performance metrics, and penalties, establishing clear expectations between service providers and customers.
- Key metrics like uptime, response time, and resolution time track service quality and confirm goals are met.
- SLAs are drafted, implemented, monitored, and reviewed regularly to make sure they stay on track and are adjusted as needed.
- While SLAs are contracts outlining service levels, KPIs are the specific metrics used to measure performance against those levels.
What are SLAs?
A Service Level Agreement (SLA) is a formal contract between a service provider and a customer that defines the services to be provided, the expected performance levels, and how those levels will be measured and enforced.
SLAs are a critical component of outsourcing and IT vendor contracts, helping to establish clear expectations. They typically include metrics such as uptime guarantees for service availability and response times (e.g., 24-hour support turnaround), as well as the penalties if service levels are not met.
While SLAs are commonly used between companies and external vendors, they are also used internally to formalize agreements between departments or teams. Ultimately, these agreements allow for transparency, accountability, and a shared understanding of service expectations.
Why Are SLAs Important?
SLAs make expectations simple and measurable. They remove guesswork, which builds trust between a service provider and a customer. When the terms are laid out clearly, it’s easier to manage risks and improve performance over time.
With an SLA, tracking progress and spotting issues becomes straightforward, making it an important tool for keeping services running smoothly.
How Does an SLA Work? A Step-by-Step Guide
Setting up an SLA starts with clearly defining what needs to be done, and then moves through monitoring and review to make sure everything stays on track.
1. Drafting the Agreement
Write down what both sides expect. This includes response times, uptime commitments, and quality standards. Having these details in black and white keeps everyone on the same page.
2. Implementing the SLA
Put the plan into action. Share the agreement with all teams involved, and make sure they know how to meet the targets.
3. Monitoring Performance
Keep an eye on how things are running. Use tools or simple reports to check if the service is meeting the promised standards.
4. Reviewing and Updating
Regularly check the SLA’s performance. Adjust the agreement when needed, fixing issues and improving processes accordingly.
What Are the Key Metrics in SLAs?
Here are the key metrics to track and define for SLAs:
- Uptime: This shows the percentage of time your service is available. A high uptime means fewer disruptions.
- Response Time: This measures how fast support teams answer issues. Faster responses keep customers happy.
- Resolution Time: Beyond just replying, it’s important to know how quickly problems are fixed.
- Performance Benchmarks: These include quality standards and other indicators that track whether service goals are met.
5 Types of SLAs
Here are the most common types of Service Level Agreements:
1. Customer-based SLA
- This SLA includes metrics relevant to the customer’s specific requirements and expectations. It includes agreements between a service provider and a company, or between departments within an organization.
2. Service-based SLA
- Focuses on a particular service provided to multiple customers. This agreement outlines the service levels that will be delivered for a specific service offering, typically applicable when the same level of service is provided to all customers.
3. Operational SLA
- Defines performance metrics related to the daily service operations, such as uptime, availability, and maintenance scheduling. This makes sure that routine operations are being met according to the agreed standards.
4. Multi-Level SLA
- Incorporates multiple levels of service to cater to different parties or varying service levels. A multi-level SLA can be used in scenarios where different internal teams, external providers, or service tiers are involved.
SLAs Vs. KPIs
An SLA is a contract between a service provider and a customer that outlines the expected level of service and how the partnership will function moving forward. Key Performance Indicators (KPIs), on the other hand, are specific metrics used to assess how well a team meets these agreed-upon standards.
For instance, an IT service desk may commit to providing technical support for various services and devices within an organization. It might guarantee factors such as system uptime, first-call resolution rates, and recovery times after outages. KPIs are the measurable benchmarks used to track whether these commitments are being met.
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