A service-level agreement, or SLA, is typically an agreement between a service provider and their customer or client. In some cases, an internal SLA governs service between departments in an organization. It is also known as an SLA contract or vendor contract.
Service-level agreements define how services will be provided. For example, internet service providers may have an SLA that describes the upload/download speeds the customer can expect, how quickly outages will be resolved, and what penalties the provider will pay if internet downtime exceeds a certain annual threshold.
A service-level agreement is different from a master service agreement, or MSA, which lists terms that will shape future transactions and agreements. It is also different from SOWs, or statements of work, which describes specific details such as timelines, activities, deliverables, pricing, and terms and conditions for one particular project.
An SOW may fall under an SLA, which may fall under an MSA. These contracts are all also distinct from a non-disclosure agreement , which binds one or more parties to confidentiality.
Service-level agreements meet three objectives:
The specific objectives of a service-level agreement will vary based on the parties and situation.
If you’re a service provider, you need to create and sign an SLA with your customer before rendering services. Service-level contracts set clear and measurable guidelines for both you and the customer. If for some reason service levels or quality don’t meet these expectations, the SLA provides recourse. If a client demands service that is outside what the SLA outlines, you can have them refer to the contract.
If you or your organization works with a service provider, a signed vendor contract at the beginning of service provides peace of mind. With penalties for breach of service laid out, you’ll rest assured that expectations will be met or remedied to your satisfaction.
There are three common types of SLAs:
There are many possible parts to an SLA depending on the parties involved and the arrangement being made. Here are six important parts often included in a service-level agreement:
If needed, these vendor contracts may have an appendix for supplementary information. Some SLAs also include details about exceptions, limitations, and cancellation conditions.
An SLA is only as good as what’s included in the contract. A struggling service provider may, for example, opt to fall short of providing the services with the least penalties attached. Alternatively, a customer may fail to provide necessary information for services to be rendered. In these situations, the stated purpose of the SLA may not be achievable.
It’s quite common to sign an SLA at the beginning of a new business relationship with a service provider. You’ve likely signed an SLA with your phone service provider, internet provider, and for any software subscriptions you use. Many companies use service-level agreements with their sales and procurement departments.
If you’re asked to sign an SLA, be sure to take a close look at the terms laid out. An SLA contract tells you what level and quality of service you should expect, and what will happen if those expectations are not met. Look at how the agreement defines and measures successful service, and whether you need to take any action if it falls short.
If you are a service provider, you’ll need to create an SLA each time you onboard a new customer or client. Alternatively, you may need an SLA if you’re an organizational leader at a company with collaborating service departments.
Creating an SLA doesn’t have to be overwhelming or complicated. There are many resources available to help providers get started. To begin, define the customer goal, then list out the specific services which will assist with reaching that goal. Determine what level of service and quality are required, and decide how to measure meeting those requirements. Finally, lay out what will happen if service falls short of meeting the goals.
With enough details, service-level agreements are legally enforceable. The more detailed the agreement is, the more enforceable it is. For this reason, it’s helpful to use contract creation software backed by legal experts. Robust contract software ensures that your SLA has all the required details and stays up to date without placing demand on time and resources.
Another benefit of using digital contracting software is that it reduces the workload of managing SLAs. Service-level agreements have to be revisited any time goals change or service levels need adjusting. Some have periodic reviews built into them, such as when contracts renew.
Managing SLAs for dozens or even hundreds of clients quickly becomes unrealistic manually. With the help of contract lifecycle management software, however, the process is automated . This results in less organizational thrash, more collaboration, and easier access to contracts for reviewing and making changes.
Thanks to automation and tools like Workflow Designer and the Ironclad Editor, contract lifecycle management software such as Ironclad is a game-changer in managing SLAs and other contracts for your business.
Simplify your SLA process with Ironclad and get back to the tasks that require your expertise and focus. Sign up for a consultation here to be one step closer to creating your first service-level agreement.
Ironclad is not a law firm, and this post does not constitute or contain legal advice. To evaluate the accuracy, sufficiency, or reliability of the ideas and guidance reflected here, or the applicability of these materials to your business, you should consult with a licensed attorney. Use of and access to any of the resources contained within Ironclad’s site do not create an attorney-client relationship between the user and Ironclad.
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