SLAs have become an effective tool for establishing and governing business relationships, primarily after IT outsourcing started developing during the late 1980s. SLAs were typically put in place to set performance expectations and guidelines to deal with discrepancies in achieving targets. Ever since managed IT services became more commonplace, SLA became more evolved and thorough.
A Service Level Agreement is an effective tool to ensure standardized delivery of business value through enhanced management of IT related processes and managed IT services. Within the global SLA management market, the U.S and APAC countries are predicted to see a huge adoption of SLA management during 2018 – 2028 periods. Let’s quickly understand the importance of SLAs, particularly in covering service providers’ agreements and expectations.
What is an SLA?
A cursory search across Google will throw up many definitions of ‘Service Level Agreement.’ While an SLA is not exactly a contract, it is nevertheless a critical part of a contract that is binding and mutually agreed upon by both parties – the company and their service provider. In brief, an SLA is an agreement between the company and the managed IT services provider that provides complete details about the expectations, obligations, and guidelines of the working relationship.
- It acts as a blueprint of the services guaranteed by the provider, lists the quality of work, and performance expectations, details customer and provider responsibilities, and gives out a guideline for penalties of breach of contract.
- SLAs act as a good starting point for establishing a stable relationship, protecting assets and reputation and aligning expectations with performance.
Why is an SLA important for a Managed IT Service Provider?
SLAs have become an industry standard, evolving with the changing nature of outsourcing and managed services. In the past, when IT-specific jobs were being outsourced, the clients were quite particular about the roles, responsibilities, and quality of service required from the service providers. To ensure adherence to the standard, indicators, metrics and guidelines were quickly established, such as issue resolution time, support response time, server downtimes, and more. Now it has become an established norm, thanks to the many benefits it provides to both parties.
Let’s look at some of the most critical advantages.
1. Clearly Defined Guidelines
An SLA ideally has clearly defined guidelines establishing the roles, responsibilities, obligations, quality standards, metrics, and service standards expected from the service providers. Especially when handling IT infrastructure management service, where the service provider is entrusted with handling technology, data, and information proactively, the onus of performance rests almost entirely on the service provider.
Therefore, there is no scope for ambiguity in drafting the SLA.
An SLA aligns both parties’ goals and expectations and makes sure you understand what you will receive for your money. Having a clearly defined guideline is highly critical for the relationship’s success as it allows both parties a level of freedom to perform, the guideline to adhere to, and accountability.
An SLA should typically have the following components mentioned and agreed upon by both parties.
- The Key Performance Indicators and Metrics for measuring standards of work.
- Service availability, priority and target responses
- Expectations and limitations
- Roles and responsibilities
- Service response
2. Peace of Mind for Both Parties
It’s a mutually agreed upon contract – by both parties – that leaves little to chance. An SLA becomes a highly important part of managed IT services as the company transfers the job of maintaining IT and customer services to the service provider. There is peace of mind when there is clarity about the standards of service provided and expected. Having a contract can hold your vendor accountable and provide recourse and protection against worst-case scenarios.
3. Provides Specific Recourse for Unmet Obligations
If your service provider fails to deliver the quality of service agreed upon, it can have major consequences for your organization’s reputation and consequent revenue. A well-drafted SLA will always have a course of action to be taken if the terms of the agreement aren’t met.
Usually, when the vendor misses the SLAs, service credits or a preset percentage of the monthly fee is deducted. Since the penalties for unmet obligations are agreed upon before contract commencement, there is less ambiguity regarding remedies.
SLAs should have a specific clause for disaster recovery Services and backup with the recovery point objective mentioned clearly. In addition, SLAs should always have defined thresholds for evaluating and reviewing missed objectives or lack of performance.
4. Establishes Methods to Measure Service Quality
Performance metrics defined in the SLA act as a great motivator and a guide to aligning performance and expectations. The main intention behind having a performance metric is to motivate performance. However, the metrics should be feasible and achievable, and the service provider should have reasonable control over their performance. Therefore, a mutually agreed baseline, periodic review and attainable performance levels form the basis of SLAs.
In most SLAs relating to IT services, companies establish their expectations from their service provider in several ways.
- Uptime percentage
- Performance benchmarks
- Service provider response time
- Error rates
- Recovery meantime
- Service downtime
- Abandonment rate
- Turnaround time and more
5. Documents Best Practices
Before drafting an SLA, you must document your best practices and outline procedures that ensure quality standards are met. Without a standard operating procedure, there is no baseline guide to follow. With a system outlining the expected quality of work, it becomes easier for vendors to focus on priorities and customers.
Documented best practices usually come in handy when dealing with challenging or unpredictable situations. Companies can give service providers a quick reference guide, which helps them deal with changing work scenarios easily. Service Level Agreements form the backbone of any mutually beneficial relationship between managed IT services and companies. And the SLAs need not be complicated or extensive, but they should lay down in certain terms the obligations and expectations of both parties.