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What is a Service-Level Agreement? Introduction to SLAs

service level agreement SLA explanation

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"Why do I need an SLA?"

If you run or manage a business, you likely need things—services you can't (or don't want to) do on your own or product management you'd assume leave to another entity. From phone systems to printer equipment maintenance, there are many advantages to outsourcing a variety of such responsibilities to an outside company. In these instances, it's in everyone's benefit to be on the same page—literally. This is when the SLA enters the picture.  

"What exactly is an SLA?"  

A service-level agreement (SLA) is a contract that spells out all expectations of your relationship with any outside service provider. These agreements also clarify either sides' consequences for failing to meet those expectations. Whenever there is a doubt as to how to proceed, a signed SLA spells out the next steps in black and white.   

"When is an SLA necessary?" 

Anytime you enter an agreement for regular service from a third-party, a Service Level Agreement is probably a good idea—not only for your company but for the service provider as well. The SLA will specify the grounds for charging any additional fees or the conditions in which you can void a service contract without penalties. For example, an SLA may stipulate that a provider's service technician must begin maintenance on a malfunctioning copier within four hours from the time your company submits a service ticket. The same agreement may also list the penalties for failing to provide a timely response. Another example might be the suspension of maintenance response following a missed monthly service payment. Ultimately, SLAs clearly define expectations from either party so that neither side can plead ignorance if one side is failing to uphold their end of the agreement.  

"Who creates and issues an SLA?" 

Though either party can draft and suggest terms of an SLA, the client has the greater incentive to create the terms of the agreement based on their business needs. Though an SLA benefits your company most, a provider's acceptance of the tenets of an SLA can increase their likelihood of earning your business. Most service providers have standardized SLAs that don't tend to fluctuate significantly. While this is the case, you can choose to request to revise these agreements before signing them if something seems off.  

"Are SLAs legally binding?" 

Though service-level agreements are meant more to clarify what your company expects from a service provider, many are informal contracts. All relevant parties are urged to have SLAs reviewed by legal counsel before agreeing to their terms. At the very least, the violation of the requirements in the SLA may potentially grant your company a penalty-free termination of the service contract. Again, this may not always be the case because no two SLAs are usually the same. 

"Are SLAs negotiable?" 

Depending on the service provider, the terms of an SLA are entirely negotiable—they are agreements, after all. Later changes to an SLA would be dependant on a variety of factors, some of which may be stipulated by a clause in the SLA itself. Other factors may include special consideration by the service provider, changing business climates, and more.  

"What are the makings of a good SLA?" 

An SLA that both sides are eager to sign typically includes a handful of common characteristics.  

  • The agreement should be mutually beneficial. If any demands are unreasonable, this can make for a contentious business agreement.  
  • The expectations should be realistic. If the likelihood of either party being able to achieve the outlined expectations is low, an SLA is more likely to fail, if agreed on in the first place.  
  • Unique scenarios should be carefully outlined. For the sake of avoiding confusion, it's in your best interest to spell out unique circumstances and exceptions. Examples of such situations may include maintenance response times during natural disasters, your company's failure to pay following a cyberattack, and other special circumstances.   

"What happens if a provider denied my submitted SLA?"  

If a service provider doesn’t agree to abide by the stipulations of your submitted SLA, you can always ask to negotiate with the service provider on an agreement that is mutually beneficial. In some instances, a service provider may not have the flexibility to accept the tenets of your drafted agreement. At this point, your company may choose to reevaluate terms or find an alternative provider that will (or can) accept the stipulations of your SLA.   

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