What is a Service Level Agreement, what should it contain, and what is the purpose of the Service Level Agreement document?
A Service Level Agreement (SLA) business document describes service level standards that Service Providers offer to customers. An SLA helps to set expectations, manage performance and address underperformance. The document contains detail on the services, priorities, responsibilities, guarantees, communication channels and points of contact, and any right (or waiver!) to compensation or penalties for underperformance.
The primary purpose of an SLA between customer and service provider is to set customer expectations regarding service quality and to manage the delivery of services to meet those expectations. With an SLA in place, it is straightforward to measure and report service performance. Should any unwanted variation in service delivery occur, customers can report this to the service provider and seek redress through the process and timescales set out in the agreement.
The SLA also helps customers when selecting a new service provider, one that can meet their requirements, during procurement activity. As such, an SLA now commonly forms a key part of a service provider’s Customer Value Proposition and can play a role in marketing and sales activity. Service providers offering a higher level of service than competitors can command a premium price – and have wider market appeal. For similar reasons the SLA document helps to signal benevolence and capability (i.e. it is a sign that a customer can trust a provider to deliver).
Service providers may choose to implement the SLA business document in different ways. Firstly, it could be a simple promise to customers – implemented as an informal arrangement between parties (e.g. not legally binding). Alternatively, it can be implemented as a legally binding contract, in which case it may be referenced within the contract for the delivery of a product/service. In such cases, agreements do not need signing. They are an extension of an existing service contract, which has already been signed by the stakeholders.
The SLA can be a standard issue document issued to all / certain groups of customers, or it may be specifically negotiated between customer and provider as part of a sales negotiation (see “Types of SLA document“). Straightforward language is used in the document, ensuring that it is understood clearly. Any technical terms used in the document should eb well defined to help clarify the service definition.
As well as defining key areas, the Service Level Agreement should specify different levels of service, performance targets and an absolute minimum service level. Communication between provider and customer is also included: how should a customer should contact the service provider, who is their first point of contact, and who or how do they complain in the case of continued underperformance? Points of contact can be named individuals, or a role/team within the service provider.
As well as defining key areas, the Service Level Agreement may also specify a level of service, including targets and a minimum service level that can be reached. The service level agreement should also define how a customer should contact the service provider – who their first point of contact is, and who or how to complain to in the case of unwanted variation in service performance. These points of contact may be explicitly defined as a named person, or simply as a role/team within the service provider.
Industries that commonly use Service Level Agreements: telecoms companies and IT service providers, Internet Service Providers (ISP), Transport and Logistics, public sector bodies and business process outsourcing companies.
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More resources for the SLA business document:
What are the different TYPES OF SERVICE LEVEL AGREEMENT?
As a Service Level Agreement can be used in different scenarios, there are several types of SLA. This could be a customer service desk, network availability, the provision of IT software or SaaS services, or for a maintenance contract. You might have SLAs for specific customers, specific markets or specific products. You might even create a multi-level SLA that defines the different sets of customers who might be serviced by different tiers of product e.g. Bronze, Silver and Gold (and billed accordingly).
Find out more about different types of SLA >
DEFINITION: What is a SERVICE LEVEL AGREEMENT?
What is a service level agreement?
A Service Level Agreement (SLA) is a document that is used to define the level of a service that exists between a service provider and their customer. An SLA should record a common understanding about services, priorities, responsibilities, guarantees, and possibly the right to compensation or penalties for underperformance on the side of the provider.
SLA Service level agreement template and downloads
A Service Level Agreement template and example. The template includes an agreement overview, stakeholders, review schedule, the agreement (including scope, requirements for the provider and the customer) as well as how the service will be managed. The template can be downloaded as a PDF, InDesign or Word file.