An Service Level Agreement (SLA) is a contract between internal or external user and the end user of the service. It specifies what the client will receive and make clear what is expected of the service provider.

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What Is Service Level
Agreement (SLA)?

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Table of Contents
1. Introduction ................................................................3-4
2. The importance of Service Level Agreement..............4-4
3. Developing Service Level Agreement .........................5-6
4. Components of a Service Level Agreement................7-8
5. Types of Service Level Agreement................................. 9
5.1. Customer-based Service Level Agreements............. 9
5.2. Service based Service Level Agreements............ 10
5.3. Multi-level Service Level Agreements ................ 10
6. Who uses SLA?......................................................10-11
7. Conclusion ................................................................. 12
8. Contact Us ................................................................. 13

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Introduction:
An SLA is a contract between internal or
external user and the end user of the service.
It specifies what the client will receive and
make clear what is expected of the service
provider.
For service beneficiaries, SLAs help define
service standard expectations and incentivize
desired behaviour’s. For service providers,
SLAs help define each party’s roles and
responsibilities, provide transparency
regarding service evaluation, and establish
mutual accountability where client
dependencies exist.

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As an example, internet service providers and
telcos will usually include service level
agreements within the terms of their contracts
with customers to define the level(s) of service
being offered in simple language terms.
The importance of Service Level Agreement
SLAs are used to define service standards,
identify, and correct service-level issues to
mitigate their impact on operations.
Agreement between parties on the service
level model, how that standard will be
measured, and the penalties or remediation
measures that will apply if the standard is not
met is important for a constructive service
relationship.

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Developing Service Level Agreement
The development of any effective SLA begins
with an array of in-scope processes. An effort
should be made to completely understand the
steps required to complete each process and
the various points at which SLAs are necessary.
If up-to-date process flow is available, that’s an
ideal starting point for this analysis. If not, the
documents will need to be created from
scratch.

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Once documentation is developed, it should
be reviewed to determine key risk areas,
identify handoffs and dependencies, and
establish timing requirements. Each of these
parameters will help segregate the areas
where SLAs are required.
It is important for SLAs to be credible to ensure
that the quality of deliverables is not
compromised. Impractical SLAs can incentivize
undesirable behaviors, including the
modification of standard reviews and controls
to meet overly aggressive timelines.
This scenario often occurs in outsourcing
relationships where the client’s demands are
not always fulfilled in a controlled manner.
Even when the client-service provider
relationship is strong and effective, defining
accurate SLAs based on the workflow and its
dependencies is key to achieve the desired
outcomes.

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Components of a Service Level Agreement
 Service description: What does the service
provider offer?
 Reliability: When should the service be
made available?
 Responsiveness: How fast should services
be delivered?
 Reporting procedure: How and to whom
should problems be informed?
 Performance monitoring: How will
performance be monitored?
 Penalties: What penalties will be
implemented if the service provider fails to
perform as stipulated?
 Constraints: Under what circumstances
will the terms of the service level
agreement be renounced?

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Service level agreements benefit both parties
by providing complete clarity as to what can be
expected from the business relationship. The
key to a service level agreement’s success rests
in the metrics that are applied to establish
whether the service provider is keeping their
end of the deal or not.
Thus, measurability is important. Quantifiable
measurements are clear and specific. It can be
divided into targets representing performance
and minimums indicating acceptable
performance. Incentives and penalties can be
developed along with a clause indicating when
the client or service provider is entitled to
terminate the agreement.

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Types of Service Level Agreement
Service level agreements have many
applications; hence they have been divided
into categories:
 Customer-based service level
agreements: The service provider and
customer put together an SLA based on the
services that will be provided. For instance,
an IT service provider may help your
business with its workforce system or
billing system. The SLA defines that
relationship in detail.

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 Service-based service level agreements:
All customers working with a service
provider receive similar conditions. If you
have a mobile service provider, it will
indicate what services it routinely offers
and what additional services are available
to its clients as part of the package.
 Multi-level service level agreements: A
single SLA can be divided into levels that
specify a string of customers using a single
service.
Who uses SLAs?
SLAs are very popular in the IT world since
companies often rely on external services such
as cloud computing, hosting, and so on.
However, any business relationship can be
governed by a service level agreement.

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Nowadays, companies can outsource a wide
range of services that contribute to their
activities. Every time activities are outsourced;
the SLA helps to define the relationship
between client and service provider.
This can cover anything from logistics
providers to accounting services, consultants,
and freelancers. As soon as a business function
is delegated to an external service provider,
the service level agreement can contribute to
a beneficial relationship.

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Conclusion
For an SLA to be efficient, both sides (client
and service provider) must work towards its
success. They should also be quantifiable and
enforceable, with performance metrics and
measurement tools established at the
beginning. Meaningful SLAs can help ensure
that quality and appropriate standards are
maintained, while providing useful insights
into operational processes.

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Contact Us
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