SERVICE LEVEL AGREEMENT

'Service Level Agreement' (SLA) is that part of a service contract where the level of service is formally defined.
In practice, the term SLA is sometimes used incorrectly in the context of contracted delivery time (of the service) or performance.

Contents

What is a Service Level Agreement (SLA)?

Common metrics

Typical SLA Contents

Importance of SLAs in Outsourcing

References

What is a Service Level Agreement (SLA)?

A 'SLA' is a formal negotiated agreement between two parties. It is a contract that exists between customers and their service provider, or between service providers. It records the common understanding about services, priorities, responsibilities, guarantee, etc. with the main purpose to agree on the level of service. For example, it may specify the levels of availability, serviceability, performance, operation or other attributes of the service like billing and even penalties in the case of violation of the SLA.
Historically, SLAs have been used since late 80's by fixed line telecom operators as part of their contracts with their corporate customers. More recently, IT departments in larger enterprises have adopted the idea of using service level agreements with their customers, i.e. users in other departments within the same enterprise, to allow for comparing the delivered quality of service with the one promised, and potentially consider the alternative of outsourcing IT services to an external company.
A SLA is generally business oriented and doesn't go into much technical detail. Its technical specifications are commonly described through either SLS (Service Level Specification) or SLO (Service Level Objective).
SLS is a technical interpretation of SLA. It is therefore intended as an operational guideline for the implementation of the service
SLO is a subset of SLS, which contains some service parameters the goals to be achieved by the SLS...

Common metrics

Service level agreements can contain numerous service performance metrics with corresponding service level objectives. A common case in IT Service Management is a call center or service desk. Metrics commonly agreed to in these cases include:

★ 'ABA' (Abandon Rate): 'Percentage' of calls abandoned while waiting to be answered.

★ 'ASA' (Average Speed to Answer): Average 'time' (usually in seconds) it takes for a call to be answered by the service desk.

★ 'TSF' (Time Service Factor): 'Percentage' of calls answered within a definite timeframe, e.g. 80% in 20 seconds.

★ 'FCR' (First Call Resolution): 'Percentage' of incoming calls that can be resolved without the use of a callback, or without having the caller call back the helpdesk to finish resolving the case.
'Uptime Agreements' are another very common metric, often used for data services such as shared hosting, virtual private servers and dedicated servers. Common agreements include percentage of network uptime, power uptime, etc.

Typical SLA Contents

SLAs commonly include segments to address: a definition of services; performance measurement; problem management; customer duties; warranties; disaster recovery; termination of agreement.^[1]

Importance of SLAs in Outsourcing

Outsourcing involves the transfer of responsibility from an organization to a supplier. The management of this new arrangement is through a contract that will include a Service Level Agreement. The contract will involve financial penalties and the right to terminate if SLAs are consistently missed.

References

1. An outline of the core elements of an SLA. The Service Level Agreement.