This article is written by Gursimran Kaur Bakshi, a student at the National University of Study and Research in Law, Ranchi. The author in this article has dealt with the meaning and features of SLA and SLA best practices.
Table of Contents
Introduction
A Service Legal Agreement (SLA) is an essential tool for communication and conflict reduction between a service provider and an end-user. An SLA applies to everyone who is seeking service from an online service provider. Hence, the basic knowledge about it is a prerequisite for the customer before subscribing to any online service. However, the general public might not be able to understand the components of an SLA because they are complex in nature. This article is an attempt to simplify the concepts relating to SLA and SLA best practices. Every customer who wants to avail of maximum service value from the service provider must read this article carefully.
All about SLA
How can an SLA be defined
In simple terms, an SLA is like any other agreement between two parties. An SLA is a contract between the service provider and the client that mentions the expected level of services to be fulfilled by the service provider. A service provider could be anyone such as an IT service provider (Y) offering Software-as-a-Service (SaaS) to the end-user (Company X). In this case, an SLA between X and Y would contain information about the parties, the services offered by Y to X, the responsibility and liability of Y, the customer support system and availability to solve X’s issues. These are just a few pointers that are possibly present in every SLA.
An SLA can either be legally binding between the parties or informally negotiated. For instance, an SLA between an Indian service provider and an Indian company needs to follow the laws of the Indian Contract Act, 1872 which is that the parties must be competent, the consideration and object must be lawful and the consent should be free from coercion, fraud, misrepresentation, and undue influence. This legislation would govern the eligibility of both parties to enter into a contractual relationship.
SLA v. OLA
An Operational Legal Agreement (OLA) is a bunch of sub-agreements within the functional grounds of an organisation dedicated to the delivery of the overall SLAs to the customers. An OLA can be entered into by the service providers within the organisation with the internal management team or external management team to maintain efficiency towards responding to the issues of the customers. Thus, it may be considered as a subset of an SLA.
Basic features of an SLA
There is a good scope of negotiations of parties in an SLA and thus, parties are allowed to agree on a structure of an SLA. Parties can agree on an informal structure. However, it remains preferable that parties enter into a legal contract since it would be easier for them to ensure accountability. Nevertheless, an SLA would remain an indispensable part of delivering services to the customers as promised.
Below are some of the basic features contained in a written SLAs. These are explained in brief here and will be dealt with in detail later.
- Every SLA deals with service description and expected services by the customer from the service provider. It may include the quality of services and the key performance indicator for improved levels of services.
- The metrics on which the provided service will be measured. Some of the most expected metrics parameters for the service level objectives (SLO) are service availability, defect rates, technical quality, security, and business results.
- A clause on termination of services. It should include penalties on the non-fulfilment of services based on service availability and service quality and an indemnification clause if third-party litigation arises due to the breach of the services by the service provider.
- The customer support system may include online and offline assistance and remote assistance.
Some of these features are provided in this section for people to understand what an SLA actually deals with. These features will help you get more clarity on the concept as you read further.
Different types of SLAs
There are broadly three types of SLAs. However, again as mentioned above, there are a lot of scopes for the parties to negotiate and structure an SLA according to their needs and requirements. Parties can definitely get inspiration from these three types of SLAs to understand the kind of arrangement they would require.
Customer-level SLA
This kind of SLA is entered between the service provider and external customers. External customers are the ones who are not a part of the same organisation as that of the service provider. Thus, it is also known as an external service agreement. It is customer-specific and includes all the services that may be needed by the customer in a single contract. It is to be drafted on a case to case basis because the needs of every customer or the company are unique.
Example of customer-level SLA
The services are customer-specific when, for instance, a service provider provides food delivery in an office and some customers want to avail it. While other customers want a different service provider who can serve them juices, the rest of the customers want hot beverages like tea or coffee as services. Here, one service provider with common terms of the agreement will not be suitable since the needs are different. This will be termed a customer-based SLA. The needs of every customer are unique and the terms of their agreement will also be different.
Service-level SLA
This kind of agreement is common for all the customers, unlike customer-based which is structured according to specific customers. Under this, the service availed by the end-users will be the same. Within this, there is also an internal-service-level SLA that can be entered between parties inside the organisation.
Example of service-level SLA
An example of expected services in an SLA is the one guaranteed by Dominos Pizza. Dominos Pizza guarantees to deliver the pizza within 30 minutes from the time the order has been placed. Another example could be, for instance, X is a food service provider and is supposed to provide common services to customers, in an office Y under the SLA. If X provide juice services to all the customers, this will be an example of service-based SLA because it covers one service for all customers.
Multi-level SLA
A multi-level SLA is customised according to the needs and suitability of the end-user company/customer. The customers are allowed to add conditions as per their suitability. It helps to integrate different conditions into one single agreement. This model is more generally used because it allows both parties to accommodate their needs.
Three levels of multi-level SLA
There are three levels of multi-level SLA within the same organisation addressing different levels of customers under the Service Level Management (SLM). There is another level of SLA which is interlinked with the other three. The multi-level SLA focuses on the needs of the customer’s organisation and changes are made in consideration of the needs of the organisation.
These are as follows:
Corporate-level
A corporate-level SLA is drafted in generic terms to address customers in general within the organisation.
Service-level
A service-level SLA becomes specific to a particular service to the customers.
Customer-level
A customer-level SLA is based on the needs of a particular group of customers.
Issue-based
This level of SLA is required for specific issues that need faster resolution with more dedicated timelines.
Example of multiple-level SLA
Multiple-level SLA has been used in SaaS related contracts because it gives space to both parties to add their specific requirements. For instance, in the above-mentioned example, if one service provider is willing to deliver all kinds of food items from juice to hot beverages and it is also willing to customise the same for every different customer and provide them different services, this can be a suitable explanation of multiple-level SLA.
Need of an SLA
An SLA is an essential requirement between a service provider and user because, first, it establishes the very basis of communication between the two parties. Once the agreement has been negotiated between the parties, there has to be regular checks and balances on whether accountability and transparency are maintained by the service provider in delivering quality services to the customer. Secondly, in cases where the expected promises are not fulfilled or are breached, the customer will have the right to claim grievances on the basis of SLA.
Components of SLA
There are namely six components of an SLA as observed in this template. These components should be present in each standard SLA. These are:
Overview of the agreement
This part of the section should ideally contain information on the type of SLA and the product or service required. For instance, ‘This Agreement represents an SLA between Company X and Customer Y for the requirement of IT services needed to maintain the product.’ It should mention other details like the scope of the agreement, date of validity of the agreement and renewal terms.
Goals and objectives
Since the agreement has to be mutually agreed upon, this part should reflect the purpose, goals, and objectives to be agreed upon by both parties. Briefly mention the purpose of the agreement which is to deliver service or product. Then, lay down the goals and objectives in bullet points. This should be precise and brief. The objectives can include a statement on the roles of both the parties and their responsibility, service ownership, when the accountability of the service provider will arise, and what will be the service support.
Stakeholders
This part should mention the details of the primary stakeholders. Since this space is specifically given to write the information of the stakeholders, parties should not write too much about the same in the overview section.
Periodic review
In periodic review, the parties are to mention the validity of the agreement and renewal terms. It should also include the time when the agreement will be reviewed. Reviewing an SLA is important because in many cases such as in multi-level SLA, new additions take place consistently with time. Parties willing to update the agreement as per their new requirements should set the review date which could be either six months or one year in which the agreement will be reviewed in a fiscal year. Many service providers appoint a Business Relationship Manager who is bestowed with the duty to make regular reviews to suggest updates and amendments to the parties as per the new needs.
Service agreement
This part should mention the responsibilities of a service provider towards the customer.
Service scope
Under this, the service scope includes all methods through which customer support and assistance can be extended. This can include telephone support, remote desktop assistance, and emergency support to name a few.
Customer requirements
This part may include both customer responsibilities and requirements under the agreement such as payment for support cost services.
Service provider requirements
Service provider responsibility and requirement can be mutual to the customer requirement/responsibilities section. This would ideally include the response time in which the query was solved and information on maintenance of the services.
Service assumptions
This assumption part of the agreement usually includes those changes that have been made after the agreement has been entered into and which shall be assumed to have been adopted by the stakeholders. However, it must be communicated to all the stakeholders.
Service management
In the above sections, the information of all the stakeholders and about the agreement is mentioned. But this section will not specify in detail the services rendered to the customer.
Service availability
The service availability section would include specifications on how the service provider would grant service to the customer through various online and offline modes.
Customers requirements
This part is in addition to the service availability part and shall specify the time frame within which the above-mentioned services will be fulfilled. For instance, if you mentioned that the customer service will be available from Monday to Friday from 7 AM to 10 AM. Then, this section should ideally specify that urgent services will be made available on high priority within 48 hours of submitting the request.
These are just some sample templates to understand all the minimum components to be included in SLA. However, these are not inclusive.
Best SLA practices
Best practices are a set of guidelines that are to be followed in a given industry or a workplace. For SLA, these are basic headings that should be there in any SLA agreement apart from the above-mentioned information. These are nothing but components of SLA that have been dealt with above in brief for your better understanding as to what lies ahead. Now, these are dealt with according to the specific heading. Some of the headings may overlap with the above-mentioned ones since there is no specific format for drafting an SLA. But generally, the headings dealt extensively can be referred to as the ideal type.
Let’s take an example, an SLA has to be entered by two parties, namely, Service Provider X and University Y. The agreement concerns that X will provide networking services to Y. So, the agreement between the two parties should ideally start with an overview of the agreement.
Purpose of the agreement
The purpose of an agreement must set clear and proper definitions and descriptions of services. Description of services should technically be the first heading in any SLA. It is because it gives information about the parties involved in it and the purpose of the contract. For any reader, this is the starting point to understand the purpose of an agreement. Hence, the section can also be named as the ‘purpose of the agreement’. Under this, set out a brief summary of how the parties (X and Y) wish to take mutual responsibilities and how changes can be made, as and when parties update the agreement to include new acceptable levels of services.
Roles and responsibilities
This section should include terms of the expectation of services. It should technically include four sub-sections which are namely, parties to the agreement, time period of the agreement, duration of agreement and renewal, and representations of both parties.
Since the above heading may mention this information, make sure to only mention these in brief above so that you can deal with these headings specifically here. There is no bar on the number of headings that one can mention under this section. But since the customer/user may not have a technical understanding, it is advisable that information is mentioned in simple language to avoid any kind of litigation.
In the duration section of the agreement, the parties can agree on a mutual date/month to review the agreement, update it if required, and when and how the renewal of the agreement can take place. Further, both parties should appoint a representative from their side who can maintain the agreement and consistently monitor it for any kind of update on the terms of services.
X customer service statement
In this part, use keywords like customer satisfaction. This part should ideally mention the specific services offered by the X and how they aim to fulfil them.
X’s Responsibilities
- X will fulfil the mutual agreement terms of services.
- X will ensure effective customer service.
- X will have to define basic terminologies such as mean time between failure, mean time to failure, mean time to repair, turnaround time, and uptime. These are technical terms often used in SLA to explain how the response system of the service provider will react to a given failure.
- X will also specify the expected outcome.
Y’s Responsibilities
As a customer, the responsibilities are mutual in extending information required by the service provider for delivering services. Y is required to follow the detailed procedure mentioned in the SLA for the customer support system.
Services provided
Mention the details of all the services provided under the agreement. This part is not technical as it only mentions the details of the services provided.
Availability and support to core services
This part should mention that the service provider is willing to provide ancillary services along with the core services. For instance, if X is taking services for installing hardware and software in Y’s place, then ancillary services will include installation services. But it is not necessary that ancillary services are to be provided in every case. It depends on the service provider.
Requesting services
Requesting services will include the procedure of how the service provider seeks to deal with the customer query. Here, mention what are the methods/mechanisms available such as online assistance, offline query solving through call, and remote assistance. The procedure that you mention here must correspond to the next two sections which will state the details of the point of contact for various services. If you have a ticketing system for solving queries, explain the same here so that you will not have to explain that further. This is again a discretion based on the needs of the parties.
Mention here the working hours in which the customer queries will be dealt with. The ways in which it will be dealt with along with their main heads. For instance, if the customer can reach out to the customer care services through phone calls, mention the main person who would be responsible for taking charge of this system of the customer response system.
It is also advisable to mention the priority standards on which the customer care preference will be taken care of. A lot of SLAs, for instance, this one, divide the preferences into high, medium, and general levels. A high level of preference reflects that the query is critical and needs to be taken care of quickly.
Service request management
Here, the service provider must give a detailed list of customer care representatives for solving different issues ranging from technical issues to everything else on the installation of services, people to contact for hardware and software issues, etc. If the service provider follows a ticketing system for resolving issues, then mention the details about that mechanism. This section should only mention the response mechanism in normal cases of query because the next section will deal with the escalated process.
The process to be followed in urgency
This section is for all those complaints that need to be solved within a quick time frame. The service provider should mention a quick mechanism for resolution which could include a customer care number or a service representative that may correspond to the query. The point of contact of all those should be specified here for the escalation process to work efficiently.
Service metric goals
Set out the metric parameters of performance / key indicators of performance. There are a common set of key indicators to evaluate the performance of the service provider. Since the current agreement concerns providing networking services, the key indicators of performance could be the percentage rating on how many times the network issues have been resolved and who quickly do they plan to resolve them. For instance, X can write that it is willing to solve the network issues at the rate of 85-90% of the time.
Reviewing and reporting
The service provider (X) should mention how it will report regarding improvements that they have made in providing the services to the customer. X can publish quarterly reports to be presented to Y on how key performance targets have been fulfilled or to be achieved. This part of the section can be mutually agreed upon by the parties.
Review of SLA
This part of the section may be unnecessary if the parties are willing to mention the details of the review in the initial part of the agreement. However, parties can separately add this section which would also allow them to mention in detail when they plan to review the agreement. Parties can specify the dates of the present review and future reviews.
Appendix
This should be used to explain certain technical terms for the convenience of the parties since there are certain terms that cannot be avoided in an SLA. Also, all miscellaneous information can be mentioned here.
Conclusion
A good SLA sets boundaries and expectations of services in clear terms. Hence, there cannot be one specific way to determine a standard SLA. However, the best practices help us to understand that there are minimum common components that are present in each and every SLA. These minimum sets of parameters should be looked into by the customers to understand whether the service provider they are engaging with is ready to take accountability. Apart from these minimum standards, parties are always welcome to add and subtract provisions and negotiate the same according to their needs and requirements. At the end of the day, it concerns the level of services provided to the customer. This can never be achieved if the customer is unsatisfied. Customer satisfaction should be prioritised in any SLA.
References
- https://www.cio.com/article/2438284/outsourcing-sla-definitions-and-solutions.html
- https://www.slatemplate.com/typesofsla.php
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