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Service Level Agreement

Frequently Asked Question

What's in an SLA?

The SLA should include not only a description of the services to be provided and their expected service levels, but also metrics by which the services are measured, the duties and responsibilities of each party, the remedies or penalties for breach, and a protocol for adding and removing metrics

Metrics should be designed so that bad behavior by either party is not rewarded. For example, if a service level is breached because the client did not provide information in a timely manner, the supplier should not be penalized

SLA Checklist:

  • Statement of objectives
  • Scope of services to be covered
  • Service provider responsibilities
  • Customer responsibilities
  • Performance metrics (response time, resolution time etc.)
  • Penalties for contract breach/exclusions

What is an indemnification clause?

An indemnification clause is an important provision in which the service provider agrees to indemnify the customer company for any breaches of its warranties. Indemnification means that the provider will have to pay the customer for any third-party litigation costs resulting from its breach of the warranties

To limit the scope of indemnifications, a service provider can:

  • limit the number of indemnities
  • establish monetary caps for the clause
  • create time limits and
  • Define the point at which the responsibility of indemnification starts

Enumerate the performance metrics which may be included in the SLA?

The type of SLA metrics required will depend on the services being provided. In choosing metrics, examine your operation and decide what is most important. The more complex the monitoring scheme, the less likely it is to be effective, since no one will have time to properly analyze the data Depending on the service, the types of metrics to monitor may include:

  • Service Availability: The amount of time the service is available for use. This may be measured by time slot for example, 99.5% availability required between 8 AM to 6 PM and more or less availability specified during other time. E-commerce operations typically have extremely aggressive SLAs at all times
  • Defect rates: Counts or percentages of errors in major deliverables. Production failures such as incomplete backups and restores, coding errors/rework, and missed deadlines may be included in this category
  • Technical quality: In outsourced application development, measurement of technical quality by commercial analysis tools that examine factors such as program size and coding defects
  • Security: In these hyper-regulated times, application and network security breaches can be costly. Measuring controllable security measures such as anti-virus updates and patching is key in proving all reasonable preventive measures were taken, in the event of an incident
  • Service provider response time -- The time it takes the service provider to respond to a customer's issue or request. A larger service provider may operate a service desk to respond to customer inquiries
  • Resolution time -- The time it takes for an issue to be resolved once logged by the service provider

Other metrics include the schedule for notification in advance of network changes that may affect users and general service usage statistics

What are the resorts available for breach of SLA by the service provider?

SLA are not only meant for establishing performance metrics but SLA may also include the clause as to how the service provider will compensate in the event of breach of contract. Penalties may be provided in the SLA if performance falls short of given benchmark

The SLA will also include a section detailing exclusions, that is, situations in which an SLA's guarantees -- and penalties for failing to meet them -- don't apply. The list might include events such as natural disasters or terrorist acts, which are beyond the control of any party to the SLA

Is an SLA transferable?

Should the service provider be acquired by or merge with another company, the customer may expect that its SLA will continue to be in force, but this may not be the fact. The agreement may have to be renegotiated. Make no assumptions; however, bear in mind that the new owner will not want to alienate existing customers, so may decide to honor existing SLAs