What is a SLA? And When is the Right Time to Implement One

Expect the unexpected. Plan for the worst. Profit from what transpires.

Although your company takes great care to guarantee that every customer transaction goes as seamlessly as possible, unanticipated complications might arise. If this happens, even the simplest activities can rapidly become a nightmare. 

Thankfully, there is a technique to assure that practically every customer or project crisis is immediately addressed: having a service-level agreement in place (SLA).

SLA is another phrase you’ll frequently hear in business, however, what exactly does it mean? Why may your company require one? What exactly do they entail? 

SLA is an abbreviation for Service-Level Agreement. These contracts are ubiquitous in business, and they are particularly popular in the IT sector, as technology businesses frequently employ each other’s services. This might include internet service providers, cloud computing professionals, corporate transformation consultants, or managed printing solutions. 

SLAs are commonly used to govern the service given between an organization and an external provider, but they may also exist between divisions within a single, big organization.

In this article, we will discuss everything about SLAs, including when is the right time to implement one.

What is an SLA? 

A Service Level Agreement (or SLA) is a contract provision that specifies the services that a service provider will offer as well as the necessary level of quality for those solutions. An SLA is typically part of an outsourced or managed service contract, although it can also be used in property management contracts and other contractual arrangements. 

What is the difference between an SLA and a contract? The main distinction is that contracts can be closed without specifying any service levels. While most organizations are unlikely to interact with service providers on a regular basis to remark on quality under a normal contract, a service level agreement indicates a negotiated settlement, regular evaluation, robust communication, and the ability to change.

Here’s an example of Slack’s SLA which promises nearly 100% uptime to their customers. 

Having said that, a service level agreement might be an informal or a legal contract, or it can constitute part of one. As a result, while a service level agreement may be contained in an agreement, a contract is not always a service level agreement. Many firms prefer to have SLAs that aren’t part of the agreement itself since it gives more flexibility in the amendment.

What’s included in an SLA?

A well-written and well-thought-out SLA must include the following components.

A summary of the agreement

Your SLA should begin with a summary of the agreement. What kind of assistance have you promised to provide to the other party? Outline the service, who will get it, and how the service’s performance will be assessed.

The goals of both parties

The goals specified in external SLAs, those between a company and its customers, are essentially those of the client. If this is your plan, work with your customer to match their demands with the capabilities of your product, and devise a quantifiable target that your firm can accomplish on a regular basis for the client.

Is this an internal service level agreement between your sales and marketing departments? Both groups’ goals should be defined in this area of the agreement, while also ensuring that when marketing meets its goal, sales may meet its own.

The requirements of both parties

SLAs should specify what each stakeholder needs to achieve their objectives. Bear in mind that a user’s requirements may extend beyond “the product” in contracts that service them. They may require more than that to achieve their objectives, such as weekly consultation, documentation, and technical support from you.

SLAs between marketing and sales should specify what they would want from the other department to assist them to meet their goals. Marketing, for example, may want weekly pipeline status updates from sales so that marketers may alter their lead-generation initiatives accordingly.

The points of contact

Who is responsible for ensuring that each party’s objectives are met? In this portion of your SLA, determine which team accomplishes what and who communicates with whom. Is a different employee using the services than the person who reports on performance every week? Clearly, state who is and is not participating in the SLA.

A plan if goals aren’t met

You may not want to think about it, but there should be explicit repercussions when an SLA target is not reached. However, don’t panic; these effects aren’t necessarily disastrous for your firm. Include a method of compensating the service’s end consumer if the service fails to reach its agreed-upon goals. According to PandaDoc, this compensation might take the form of “service credits” in external SLAs.

For sales and marketing SLAs, collaborate with your sales team to develop a strategy for making up any lost income as a consequence of a missed sales quota. You may implement a strike system that makes certain personnel, in both marketing and sales, responsible for detecting and correcting low-performance challenges.

The conditions of cancellation

In what situations will your SLA be revoked? Whether your agreement covers a single client or two departments within the organization, you’ll usually find yourself removing the SLA when it’s simply not functioning. Perhaps your goals have gone unfulfilled for the previous three months, or the present agreement just lacks buy-in from all parties involved.

Create explicit grounds for canceling the present SLA in favor of, perhaps, a superior SLA.

Why does your business need an SLA?

Check out this article for more info on SLA best practices. SLAs are essential if your company often outsources tasks to third-party vendors (or to various divisions of its own organization) since they protect both parties’ interests by outlining the anticipated quality of service and the criteria for monitoring performance from the start. Penalties may be imposed if the work fails to fulfill the agreed-upon deadlines or if the contract is violated. 

While most suppliers and organizations have baseline SLAs, the specific conditions are normally negotiated between the client and service provider before being evaluated and approved by teams of lawyers.

An SLA is essential because, without one, either party may easily refuse responsibility if difficulties emerge in their relationship. It may also provide a firm with a lot of data in terms of key performance indicators. It also allows a corporation to easily identify areas where it can improve customer service even while making customer support an explicit priority. 

An SLA creates a quantitative and accurate performance baseline for employees. Finally, the SLA specifies penalties for noncompliance, demonstrating an organization’s commitment to meeting its objectives while also telling the customer that penalties are in place.

The unquestionable importance of SLA

The SLA is an essential component of any contract, and it will be beneficial in the long run if it is carefully thought out and formalized from the start of a relationship. It safeguards both parties and, in the event of a conflict, specifies solutions to avoid misunderstandings. This may save both the client and the provider a lot of time and money.

SLAs should ideally be linked with the engagement’s technical or commercial goals. Irregularity can have an adverse effect on deal price, service execution efficiency, and customer satisfaction.

Author bio- Tuba Sarosh

Tuba Sarosh is a result-driven SEO content writer and editor, who helps businesses turn their readers into clients. She writes about trends, tips, how-tos, and other cool stuff that helps businesses serve their customers better. When not writing, she’s either reading a good book or experimenting with recipes.