What is SLA? It is a contract specifying all the services to be delivered by the contracted company to the contractor company. The SLA includes responsible persons, deadlines or answer attendance, technical support formats and others.
Terms of the SLA, the initials of Service Level Agreement technically discriminate all services in the agreement, clarifying doubts and reducing the possibility of double interpretations.
The SLA is an essential document for negotiations involving companies in the technology sector, including IT outsourcing contract models.
In this article, you will learn:
- What SLA is and what it is for?
- SLA types
- SLA contract benefits
- SLA Models
- Who needs an SLA contract?
- How to set up an effective SLA contract
- How to monitor an SLA?
What SLA is and what it is for?
SLA is a contract that details the service provided, including responsibilities, deadlines and monitoring criteria.
According to the glossary of the Gartner group that is a giant in the technology market, SLA is a service level agreement that:
Defines expectations between the supplier and the customer, describes the products or services to be delivered, the focus of contact for end user issues and the criteria by which the effectiveness of the process is achieved, monitored and validated.
In other words, the SLA is a technical contract that details the relationship within the provision of services. SLA is ideal to reduce frustrations, avoid questionable interpretations, and balance expectations including defining criteria to measure service quality.
The Service Level Agreement is extremely important for both parties as it provides the contracted terms, besides it is like a working script for the involved parties. It also ensures that the services will meet the requirements and needs of the contracting company.
It is a widely used contract. In some cases it is required by the ABNT NBR ISO / IEC 20000-1: 2011 standard, in contracts involving IT companies. However, its use is not limited to this sector as we will see below.
What SLA is in HR
People Management (the Human Resources department) can also use the SLA contract as a guide in contract management both between company and recruiter and between company and employee.
What SLA is in Purchasing
Likewise, the SLA can be implemented to indicate the contractual relationship between the company and suppliers regardless of the product or service.
Purchasing SLA includes, for example, details about the order, delivery, payment process, as well as the reverse logistics process, return and auditing receivable metrics.
What SLA is in Logistics
Service Level Agreement can be applied to detail the hiring of professionals or companies responsible for logistics. Among others, it may include refund policies, commitment to current traffic laws, liability in case of penalties.
What SLA is in IT
SLA is a contract model initially required in the information technology sector according to ABNT NBR ISO / IEC 20000-1: 2011. The objective of SLA in IT sector is to protect the contractor and contracted parties besides giving greater credibility and reliability to the relationship.
The SLA is not a rigid contract it can be adapted to the needs of each company.
As it is not rigid, nor based on a standard model the SLA can be implemented in the most appropriate way to reality and the needs of the contracting companies. Get to know that:
The service-based SLA is a standard contract regardless of the customer. It details and discriminates the services offered by the contracted company. It is a way to standardize quality as well as facilitating bureaucracy in the case of new hires, as it is not required to be rewritten on a case-by-case basis.
Unlike the previous one, SLA focusing on customers will take the needs, expectations and service details of each one into account. Therefore, a new SLA model must be developed for each new contract.
The management of this model is much more complex as it is so specific. To check if the customer-based SLA is really the best alternative for your business, evaluating the reality of your company and its services.
A very complete mode, the SLA with several levels aims to manage issues divided into three groups: corporate, customer and service.
At the first level the SLA will address the specifications in the management of services that in general tend to be common among different companies.
At the second level the SLA will identify specific customer issues such as business hours, types of connection or required access, points of contact and meeting frequency for follow-up.
The third and final level provides specific details about the service offered, the quality standard of deliveries, the maximum deadlines to perform activities and the KPIs for deliveries analysis.
SLA contract benefits
Having an SLA contract has other advantages and associated benefits in addition to offering security and providing credibility for both parties of the negotiation, Check it out:
- increases customer satisfaction;
- offers greater clarity in processes;
- improves the performance and productivity of the contracted team;
- avoids misunderstandings;
- equalizes expectations and clarifies concepts;
- improves communication;
- offers credibility to the companies involved;
- prevents rework, redundancies or deviations in function;
- avoid unnecessary costs;
- allows the concrete evaluation of the service quality, through the definition of metrics.
Depending on the complexity of the service you can establish a simple, complex SLA or non-negotiable SLA.
There are three SLA models based on the specification level and detail of the service. Regardless of the chosen contract model it must address, at least these three variables:
- the service(s) to be provided;
- the conditions under which this service will be provided;
- the standard of this service – and in this article, there are numerous technical, operational or managerial details.
Next, we’ll talk about SLA models, with a few simple examples to illustrate:
The basic SLA model specifies the minimum of a service delivery. In it, the customer agrees to receive a certain service, according to a certain established standard, and the supplier agrees to deliver this service, in the same standard.
For example: let’s say you go to a bar in your town every Saturday. You order a 300 ml beers, and expect it to be cold. If so, you agree to pay the service fee. If not, you ask not to pay the 10%.
In this simple SLA model, we have variables as:
- customer: you, who go to the bar every Saturday;
- supplier: the bar;
- definition of service: beer;
- quality indicator: the temperature of the beer;
- penalty in case of non-compliance with the expected quality: non-payment of the service fee;
- periodicity: in this case if you are committed to go every Saturday, we have a defined period although this is not an essential item.
A non-negotiable SLA contract is one that is registered in writing and is publicly accepted. This model contract can be brought to justice in case of non-compliance.
It is the case of a mobile phone contract, for example. Both the company and the customer have clear penalties in case of non-compliance with any clause of the contract.
What happens, however, is that not every customer is aware of the specifications and commitments made with the contracted company.
A complex is the one used to hire an IT company. It details responsibilities, commitments and penalties for both parties.
For example: company A hires company B as IT outsourcing, which will set limits and targets for bandwidth speed, paging, among others, as well as undertake the aim of guaranteeing 99.99% availability of servers through monitoring software.
Whereas, company A provides personal contacts of those responsible for the management and attendance of company B as well as sending information for access to systems such as users and passwords.
Company A also undertakes to keep company B’s registration on a safe list allowing access to company at all times.
Company B on the other hand, proposes to keep employee records with the right to have their access updated in addition to immediately notifying in case of resignations, so that the company can change passwords and permissions.
This SLA should also detail the expected deadlines for resolution of services, the expected behavior in case of problems, the deadline for cancellation of unfulfilled clauses, fees (in cash) and other penalties.
Who needs an SLA contract?
Although it can be used by different departments and for various managements the SLA is required for contracts involving IT companies.
This includes internet providers, hosting companies, software developers, technicians for hardware maintenance, and other IT infrastructure services.
Some large companies with a consolidated internal IT department can adopt the SLA contract between their co-workers (internal customers), for example, by measuring the department’s work as a way to justify new investments.
How to set up an effective SLA contract
Remember that an effective SLA is one that details and clarifies any critical point in service delivery.
Below, we offer you some essential tips for you to set up a complete and effective SLA contract. Evaluate the suggestions and implement them according to the reality or need of your company.
You can also check out 6 efficient tips to prepare an SLA in a short article by clicking here.
Identify customer needs
The hiring of a particular service aims to meet a specific customer need. In the SLA, it is important that this need is identified and easy to understand.
This need will guide other decisions in addition to serve as a thermometer in relation to the effectiveness of the service provided (ask: “Was the need answered?”).
Clarify the objectives of the service provided
Likewise it is important to clarify the purpose of the service, in other words, what it proposes to solve. This objective must of course to solve the need defined in the previous item.
Describe all activities
For o be effective all activities considered in the provision of the service must be detailed in the most transparent and specific way possible.
With the SLA it is also possible to reduce the possibility of misinterpretations, reducing conflicts. Talk to the contracting party to understand the concepts, expectations and align all points that could lead future discussions.
Although the SLA presents penalties it is not necessarily the only way to solve the issues that may arise.
Offer opportunities for dialogue such as periodic meetings, a deadline to reverse any situation contrary to the purpose of the contract, as well as other alternatives that value communication and relationships.
One of the main benefits of an SLA contract is the balancing of expectations. It allows the customer and supplier to agree on needs and what will or will not be possible to answer.
In addition, it is now that the concepts need to be clarified. For example, what is a critical situation? What is a bug? What is an emergency?
This debate can significantly reduce the pressure that often surrounds the IT department.
Define performance measurement metrics
The performance metrics will serve to enable the contracting party to evaluate the quality of the service provided, verify that it is in accordance with the standard stated in the SLA.
Productivity indicators, quality metrics (such as percentage of network availability) can be defined, in addition to the delivery time related KPIs or possible indicators to be measured using specific tools.
Define follow-up reports
Once the metrics have been defined, it is possible to stipulate a periodicity for receiving and evaluating the work, through reports.
Reports are required to support decision-making, in the event of an evaluation for new investments or a change of supplier, for example.
Establish the form of management
Demand management should be established and described. For example, the contractor company can request new activities or report issues through an open call system.
In return, the contracted company will have a deadline to resolve this list of calls, according to the defined priorities.
Determine the responsibilities of the parties
Like any contract both parties must have responsibilities, obligations and penalties in case of non compliance with what has been agreed upon.
Describe all, including deadlines, contacts, forms of communication and other operational information.
Detail security routines and privacy policies
In the SLA, security routines and privacy policies should also be specified, defining the responsible and registering users with different permission levels, depending on the complexity of the service.
Especially now, with the LGPD about to take effect, security and privacy are more common themes which deserve full attention of IT team and other company managers.
Establish a routine for managing incidents to minimize risks and losses and avoid any potential legal action.
Define property rights
Property rights clauses can create arguments between customer and supplier. Therefore, it is important that this issue is discussed and detailed in the SLA, to avoid disruptions.
The SLA should establish confidentiality clauses in favor of both the customer (preventing the supplier from disclosing strategic information) and the supplier (preventing the customer from disclosing a system code).
Anticipate periodic reviews
With monitoring it is possible to observe the need for a review or adjustment in the service model, or in itself.
Therefore the SLA can be revised whenever as needed to update information or complete it with new features.
How to monitor?
Contract monitoring will depend on the indicators chosen as evaluation criteria. However, there are online systems with tools that assist to track calls such as Milvus.
The platform makes it possible to optimize the management of the actions of the IT team gaining efficiency and increasing productivity. Also to the contracting party to monitor the performance of the supplier.
Ask your supplier to implement the Milvus system and keep track of the services performed for your company. Free 7-day trial!
SLA, Service Level Agreement is a fundamental contract to manage and monitor the services of the IT department.
SLA or Service Level Agreement is a contract between two parties, which specifies the service provided and details it at the technical, operational and managerial level.
Therefore, quality standards and KPIs are defined to monitor these standards. The Service Level Agreement allows for a concrete assessment of the provided service besides establishing penalties for non-compliance with obligations.
With the digital transformation of companies, it is essential to have a committed and clear IT service to avoid headaches and difficulties in the relationship between contractor and contracted parties. In addition, concepts such as availability, bugs, innovation and performance should be very well negotiated.
Discover the Milvus platform that allows you to optimize the management of your IT team’s actions, resulting in efficiency gains and increased productivity. Take a free trial!