Service level agreements (SLAs) are a list of objectives, services, and responsibilities a customer can expect suppliers or managed services providers (MSPs) to provide. SLAs also include metrics for measuring the accuracy and extent to which MSPs provide those services as well as potential penalties if the levels of service specified by the agreement aren’t maintained. While SLAs are typically negotiated between customers and service providers, it’s not unheard of for departments within the same company to create their own service agreements.
SLAs are especially important for MSPs, since they help to ensure you’re meeting your agreed-upon responsibilities—while also protecting your business in case a customer asks for services that exceed those outlined in the agreement. SLAs can also specify responsibilities on the part of the customer as well, such as ensuring a representative is available to help address issues pertaining to the service agreement.
There are several commonly used metrics that measure the success or efficiency of SLAs—and these can be effectively managed by certain SLA tools and software solutions. So here are a few things to keep in mind before you start negotiating service agreements.
What Is SLA Management?
Broadly defined, SLA management is the ongoing process of ensuring all provided services and processes—including the underlying contracts—are in alignment with the agreed-upon service level targets stipulated by the contract. From the creation of help desk tickets to retrospective reporting and regular customer feedback, SLA monitoring helps to protect your business—and ensure your customers are satisfied.
Because strong SLAs will specify the measurement criteria for the agreed upon services and responsibilities, proper SLA management also involves remaining attentive to those metrics.
Common Service Level Agreement Metrics
The details of individual SLAs will of course vary depending on the type of services a customer requires—and the metrics used to measure how well the customer and provider are meeting their service targets will vary accordingly. SLA metrics are associated with specific SLA objectives, which are essentially the reason why each metric is important. Here are a few of the most common metrics used to measure how service provider performance and quality is meeting customer expectations:
- Abandonment Rate: the percentage of queued calls customers abandon while waiting for an answer.
- Availability or Uptime: also referred to as system reliability. This is usually measured by the percentage of time a device has been working, or the percentage of time that provided services are operational and accessible to the customer.
- Average Speed of Answer (ASA): the average amount of time required for the service desk to answer a call.
- Business Results: the use of key performance indicators to calculate how the contributions of service providers affect business performance.
- Defect Rate: the percentage of errors in deliverables. This can include everything from coding errors to missed deadlines.
- First-call Resolution (FCR): the percentage of incoming calls resolved without the use of a help desk callback to finish resolving the case.
- Mean Time to Recovery (MTTR): the time required to recover following a service outage.
- Security: the number of antivirus updates or patches installed. Even if an incident occurs, MSPs can demonstrate they’ve taken preventative measures.
- Time Service Factor (TSF): the percentage of queued calls answered within a defined time frame.
- Turnaround Time (TAT): the time required to resolve a specific task or issue once the service provider receives it.
Beyond establishing the relevant performance metrics, SLAs can stipulate contingencies for how the services provider can remediate or compensate for potential contract breaches. The agreements will also include a force majeure clause detailing situations and events outside the service provider’s control—such as natural disasters—interruptions of service won’t be penalized.
One important thing for MSPs to remember when entering into an SLA is, when selecting metrics, it’s vital to select the ones that will motivate desired behavior—both on the part of the customer and the services provider. This will ideally lead to both parties optimizing their processes to reach the target performance objectives.
Another thing to keep in mind is fewer metrics are usually better—a smaller number will provide a more manageable amount of data to analyze for performance assessment. Similarly, the SLA should favor metrics that can be easily collected and measured.
What Are the Three Types of SLAs?
SLAs are broadly categorized according to three tiers:
- Customer-based SLA: These agreements are between service providers and individual customer groups—and apply to all the services the customer group uses. For instance, if the financial department of a company constitutes a customer group, a customer-based SLA could require that service provider be responsible for managing the financial software as well as billing, payroll, and procurement systems.
- Service-based SLA: These agreements are between service providers and customers—and are based on specific services that the service provider offers. This can include providing email systems for customers, or routine maintenance as part of a service package.
- Multi-level SLA: These agreements are categorized into three sub-tiers, with each one applying the same services to different customer groups within the same SLA.
- Corporate-level SLA. This provides SLA management for every user across the customer organization. Many of the issues this level of SLA management deals with are not critical issues, so SLA performance reviews and updates are usually required on a less frequent basis.
- Customer-level SLA. This provides SLA management for specific customer groups—but applies to all services provided or in use.
- Service-level SLA. This provides SLA management for specific services related to specific customer groups.
Why Are SLAs Important?
SLAs provide several valuable benefits for both customers and service providers. MSPs rely on SLAs to manage customer expectations and to define the situations in which customers can’t hold them liable for service outages or issues related to performance. SLAs are also essential for establishing performance targets and benchmarks to set a standard for MSPs to meet.
For MSPs, SLAs tend to be one of the two foundational contracts established with their customers. In addition to the service agreement, many service providers will enter into a master services agreement with customers that lays out the broad overview of terms and conditions under which they agree to provide services. The master services agreement will often incorporate the conditions of the SLA, which allows for more specificity regarding the services MSPs will provide and the metrics they will use to measure the effectiveness of those services.
For customers, some of the benefits SLAs provide include a means of describing the performance characteristics of the services they are receiving—which they can use to compare or generate leverage when assessing other service providers’ SLAs. The service agreements will also offer means for seeking redress for breaches of contract via service credits or other forms of compensation and remediation.
SLA reporting is another important vector for ensuring MSPs are meeting service targets. Many MSPs will choose to make statistics related to performance available online so customers can easily confirm they haven’t breached they SLA contracts.
Service Level Agreement Best Practices
We’ve already mentioned several SLA best practices in this article—SLAs must be measurable, updated periodically, and account for unexpected situations—but there are a few others that bear mentioning.
First, you should write SLAs in clear, jargon-free language. This is to ensure clarity for all parties involved, so customers who may not be technologically literate still understand exactly what they’re agreeing to when entering into a contract with an MSP or other service provider.
Second, you should clearly define the processes and methodologies related to how you measure, enforce, and compensate service levels. While in many cases, that responsibility falls on the MSP, working collaboratively with customers during the process of contract negotiation will help to avoid misunderstandings and ensure that customer and provider are on the same page.
These defined processes become especially important for SLA management in cloud computing, because cloud-based service providers tend to be hesitant about making alterations to their boilerplate SLA agreements. This is because cloud-based profit margins are tighter, and thus businesses rely on providing services to large customer bases. Overall, regardless of what type of service you’re providing, an SLA helps define expectations and ensure the customer-provider relationship remains satisfactory for all involved parties.
For more information on SLA management read through our related blog articles.