What is a Service-Level Agreement (SLA) and Why Do Businesses Need It

What is a Service-Level Agreement (SLA) and Why Do Businesses Need It

Service quality improvement is still the number one priority. More often businesses are searching for ways to improve the development workflow in order to create trusting and transparent relationships with customers. 

When offering your product or services you should conclude a “Service-Level Agreement” to reinforce the relationship between the vendor and the customer. SLA are an indispensable component for outsourcing companies which guarantee legal protection if requirements are breached.

The SLA describes the conditions for the services provision, establishes a list of such services, as well as the rules by which the customer will use them. At the same time, SLA is one of the main mechanisms for managing the quality and user expectations.

In this article we are going to highlight following points: 

  1. SLA: General information
  2. Key types of SLAs
  3. SLA generation process
  4. How do business can benefit using SLA
  5. SLA in Azati

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SLA: General information

Service Level Agreement (SLA) – is an agreement between the customer and the contractor containing a description of the services, parties rights and obligations and, most importantly, the agreed level of quality for the service provision. The SLA clearly prescribes the time frame for eliminating problems, and determines the penalties imposed on the company. Thus, you will minimize losses. 

The SLA gives a clear answer to the question “Is the support service good or bad?”.

What should be in the SLA?

  1. Services description that are provided under the SLA
  2. Description of the services provision up to the working procedure
  3. Measurable parameters of the IT services quality. These quality dimensions should be aligned with the organization’s business objectives and reflect the needs of business users, including how IT services are delivered. Such quality parameters for example: the time to resolve incidents or the time during which the owner should restore the service, etc. So, for example, creating a mailbox for a new employee should take no more than 4 hours from the IT service.

By fixing the SLA conditions, we streamline our relationships with users, determining who, when and in what form submits a request to us. It is impossible to expect a prompt billing for a shipment if we receive a request at the entrance “Supply something for us, preferably in holiday packaging.” We will definitely spend a lot of time detailing the request. And thus, we will no longer be able to talk about any efficiency in fulfilling requests – and not through our fault! 

In order to provide access to a shared folder, you need to know which shared folder you need access to; on the basis of what we will fulfill this request (in accordance with the information security policy), etc.

Finally, SLA is about managing user expectations. Only such service can be of high quality, when everyone who submits an application always knows when this application will be executed. That is, when we competently manage the expectations of our users.

Key types of Service-Level-Agreement

When entering into SLAs, you should be able to understand how and what or who its may be targeting. By having an understanding of the various types, you will be able to organize a more cohesive service provisioning strategy. 

– Customer-based

This type of  SLA is based on the organization of the customer’s commitments and expectations for the established conditions. This type is more specific, as its implementation can be more complicated, because the сustomer has his own requirements about the level of service. Such a relationship should include only those edits that are approved and signed by both parties. Customer-based contracts can include items such as service standards, expansion or increase procedures, in other words, escalations, and various other details.

– Service-based

Such a format is only for the provided services. But in a service-based SLA, owner doesn’t add individual elements to the arrangement, unlike the previous type. When the parties sign the agreement, they must read it beforehand to be aware of all sorts of obligations to each other. 

– Multi-level

It is formed by several parties and divided into different levels specific to the particular people using the service. This option suits for companies that have a variety of customers on the financial side who charge for certain service plans. This option allows you to develop a diversity of your services based on your consumers financial situation. Diversity can include set-price plans, like a free plan, a typical plan, and a premium plan.

SLA generation process

It is really crucial to take into account all possible nuances documenting terms and conditions between two parties. To create an accurate SLA, you need to consider all the following points. 

1.       Define Requirements 

Determining customers’ expectations can put you on the right path to growth and prosperity. You have to establish a direct contact to efficiently interact with them and define an expected outcome after consumption. What would they like to see and how quickly the service will meet all requirements.

2. Determine organizational issues with consumer

After dealing with the first step, you can go to the next step. Having made the list, it’s time to estimate the cost, the general business workflow and project management aspects. 

3.       Select metrics to measure the productivity of post-entry agreements

Determining whether or not you’ve chosen the right service path is impossible without metrics to define the delivering process effectiveness. Such an approach will help to correctly detect the consumers’ expectations. Metrics includes a variety of indicators, but the most commonly used are:

  • Service availability – the period which set the exploitation duration
  • Defect rates – allowable errors amount
  • Technical quality – consider bug-free product with great user experience
  • Security – compliance with all security measures, i.g to avoid leakage of personal information
  • Business results – using existing key performance indicators is typically the best approach as long as the vendor’s contribution to those KPIs can be calculated.

4.       Agree and use SLAs

After forming the SLA you need to figure out how it functioning in practice, and that’s where the work algorithm comes in:

  • Deliver the parameters to all the customer’s employees;
  • Comply with the metrics concerning the parties;
  • Constantly monitor compliance of parameters with declared indicators;
  • Processes optimization within the company;
  • Enhance your knowledge of SLA, as a perfect agreement is an unattainable ideal.

How do business can benefit using SLA

Once you understand the basics of SLAs it’s time to speak about benefits the agreement can bring to your business. The superficial advantages are conflict prevention, the establishment of a strong supplier-customer relationship, and productivity gains.

But if go deeper, we can highlight such benefits as:

– A high level of communication

The contract provides seamless connection between the two parties, which is very critical in business relationships. Thus, we can see clearly stated positions of each other.

– Flexibility

With a regular contract, terminology and standards are mostly specified. So the process of introducing something new becomes less comfortable for each party, but it is not true for SLA. Due to its flexibility we can make any modification without wasting a lot of time and effort. 

– Long-term perspective of maintenance

In today’s business realities, it’s challenging to create a long-term commitment with anyone, whether it’s an associate or a customer. This agreement is quite loyal to the second and third parties. Since all the most necessary conditions are specified in it further trust only increases and does not cross the established boundaries.

Also SLA has many advantages for both customers and performers.

For customers the pluses are:

  1. Possibility to get a service at a sufficient level and know what he will get as a result
  2. Control the terms of requests
  3. Financial responsibilities
  4. Application fulfillment oversees, where all the parameters of the agreement are observed

At the same time, the contractor also has advantages:

  1. The details of the claimed service are approved and calculated on the basis of the basic response time for questions arising based on the contractor’s terms and conditions;
  2. Knowledge of responsibility area based on established parameters;
  3. Resolving incidents that occur even without the customer’s involvement on the basis of requirements;
  4. Execution of the service on the basis of the party’s request based on the tariff and its objectives.

Together with the SLA the performer will be able to indicate the boundaries of the company and that he cannot solve the problem at the moment because it is out of working hours. In such a situation the customer can be sure that the problem will be solved with the terms of the SLA. 

Consequently, it can adjust its schedule. Even if the problems are not solved in time, the customer will be relaxed, because the contract contains a penalty for the contractor.

Therefore, SLA is beneficial for both parties: the provider will not be inundated with new demands, and the customer will have a guarantee that his problems will be solved within the stipulated time.

What about Azati?

Azati does not stand still and every time we bring something new to our service provision. This applies to service delivery, attracting customers, as well as employees. And we use this agreement to make our work as smoothly as possible, without unnecessary and unreasonable claims and conflicts among all parties.

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