Whether evaluating a Communications Platform as a Service or any software provider, companies have a strong understanding of the specific services, features, and management they expect to receive.
How do companies guarantee that providers they work with will maintain the high service standards they claim to offer?
By creating a service level agreement, or SLA for short.
What is an SLA, what kinds of them exist, and what information belongs in one?
Without knowing the essential service standards and set response requirements to include, providers can get away with failing to deliver the services they promised a company.
Vendor Contracts vs. Service Level Agreements
Vendor contracts are signed agreements between two organizations or individuals that legally require both parties to complete specific actions.
The contract outlines clear requirements for both parties regarding things like:
- Time frames
- Total pricing
- Insurance and liability
- Reporting and auditing
In the majority of cases, regulatory and compliance standards require formal contracts between a company and a vendor to improve risk management and protect both parties in the event of a dispute or lawsuit.
Vendor contracts outline the goods/services and other deliverables, the specific steps that will be taken to complete the legal obligations in the contract, and any regulatory requirements that must be followed.
What is a Service Level Agreement?
By contrast, service level agreements include both the actions required as well as the overall standards of service and service level management that must be maintained over the course of the agreement.
SLAs also clearly state penalties and actions to be taken if these standards are not maintained.
For example, an SLA may require a business VoIP provider like Vonage to guarantee a 99.9% service uptime. If it drops to 97%, then the customer’s payment will be reduced by 5%.
In addition to outlining the expected level of service the company will receive from the vendor, SLAs also determine the ways in which services will be measured and evaluated to ensure that they meet those service standards.
An SLA can be a standalone document, or it can be outlined and incorporated into the overall vendor contract.
SLA agreements often exist between customers and their internet service provider, call center software, software development agency, cloud service/cloud computing host, or SaaS.
The goals of a service level agreement are to:
- Define services to be provided and performance standards to be followed
- Define penalties and remedial actions should the terms of the SLA not be met
- Outline specific benchmarks
- Create a consistent standard for performance reporting and monitoring
- Protect the rights of all parties
- Determine contract endpoint or terms of ending the contract early
Note that while the majority of SLAs refer to agreements made between a business and an external party or supplier, internal agreements between departments are also common.
The Three Main Types of SLAs
SLAs fall into three main categories: customer-based, service-based, and multi-level agreements.
A customer-based SLA is a singular agreement between a company and a provider outlining all services and service levels agreed upon by all parties.
For example, a company providing a virtual phone system may offer bundled services like voice calling, video calling, and SMS messaging. All of these services are defined within a single contract, as opposed to three separate ones.
A service-based SLA is the most straightforward type of agreement, as it states that all customers receive the same quality of service from the provider.
Any end-user who signs a service-based agreement receives the same standard of service, regardless of their role, company, or department. These types of agreements generally give the vendor/provider an advantage.
A multi-level SLA offers the highest possible customization, covering services at the corporate, customer, and service levels.
The corporate-level agreement isn’t updated often, as the service standards it outlines generally do not change. Any particular customer within the end-user company is included in the corporate level agreement.
The customer-level agreement covers services on a per-customer basis. For example, an IT service management department within a company will need higher security service levels than the sales department at that same company.
The service-level section covers all the services a provider gives a company. For example, all employees of a company, regardless of their department, can contact the provider’s customer support line.
What to Include in a Service Level Agreement
The majority of service providers have developed a standard SLA to be given to potential clients.
However, as is to be expected, these pre-developed SLAs tend to heavily favor and protect the supplier.
Consider them as a starting point for negotiations, and make sure you’ve included all the necessary information to protect your business.
The SLA cover page should include:
- The current version
- The change history
- Dates of prior versions
- Signatures and document approvals
- Dates of last and upcoming SLA reviews
Document Change Record
|2.0||January 12, 2020||Updated Monitoring Frequency||Management Agreement|
|1.0||August 12, 2019||Initial SLA Agreement||N/A|
|Elle McNally||CFO, Addams Sales Corporation||January 12, 2020|
|Williams Turner||Director of Sales, Lightning Speed: VoIP and Internet Solutions||January 12, 2020|
Last Review: January 12, 2020
Upcoming Review: August 12, 2020
SLA Introduction and Overview
The introduction section introduces the parties involved in the SLA, defines its general purpose, and covers standards for contract changes, renewals, termination.
This is a Service Level Agreement between Addams Sales Corporation and Lightning Speed: VoIP and Internet Solutions. It serves to illustrate the required services, service management processes, and expected level of service between August 12, 2019 and January 12, 2022. Subject to updates.
Points of Contact and Stakeholders
This section outlines all entities involved in developing and signing off on the SLA, including any attorneys consulted.
|Addams Sales Corporation||2215 Wednesday Way Salem, MA 01915||Elle McNally|
|Lightning Speed: VoIP and Internet Solutions||4027 Strong Street Boston, MA 02101||Williams Turner|
|Jbali, Naeck, and Robinson Attorneys||1512 Ireland DriveSalem, MA 0915||Daniel Jbali, Esq.|
Here, outline any abbreviations, terms, or acronyms that are used to represent service providers, customers, contractual details, and more.
|SLA||Service Level Agreement|
|Uptime||Amount of time service, network, server, etc. are operating normally|
SLA Purpose and Goals
Consider this section as a way to categorize the kinds of services provided, as well as an overview of what will be discussed further in the agreement.
The purpose of this SLA is to define the requirements of CPaaS services regarding:
- Expected CPaas services Lightning Speed will provide to Addams Sales
- Responsibilities of both parties
- Reporting and support requirements
- Service Levels
- The renewal, cancellation, and update policies
- Dispute resolution and penalties
- Limitations and Exceptions
This section should cover the requirements for updating, renewing, canceling, and ending the contract.
- Addams Sales must request a contract renewal a minimum of 60 days before the agreement expires (January 12, 2022.)
- Any modifications made to this agreement must be signed off on by all parties involved
- Addams Sales must provide Lightning Speed with a minimum of 90 days notice for early termination
- This agreement, unless renewed, will expire on January 12, 2022
- Addams Sales or Lightning Speed must provide evidence that the terms of the agreement have not been met for 5 consecutive business days in order to request an early termination
The Service and Management Agreement sections are the most important part of an SLA, as they clearly define the specific requirements and expectations of both parties, though mainly the responsibilities of the provider.
This section determines the services provided, acceptable KPIs and performance metrics, monitoring and reporting timelines, service levels, and response timelines. This post gives you an excellent outline of how to determine what to measure.
Service Provider and Customer Requirements
This section covers the provider’s general responsibilities to the company and the company’s responsibilities to the provider.
It is designed to protect both parties, ensuring that neither can be held responsible for issues that are outside of their control.
Addams Sales Responsibilities:
- Addams Sales will provide all information required for Lightning Speed to carry out their responsibilities as outlined in this agreement.
- Addams Sales will update Lightning Speed when changes in business objectives, compliance requirements, or any changes that will impact the responsibilities of Lightning Speed occur.
Lightning Speed Responsibilities:
- Lightning Speed will provide the services outlined in this agreement. Lightning Speed shall not be held responsible for the actions or services of outside third-party vendors.
- Lightning Speed will inform Addams Sales of upcoming service changes, outages, security breaches, data loss, or other disruptions.
Metrics to Be Monitored
This section refers to the metrics and KPIs (Key Performance Indicators) used to determine whether or not the provider is fulfilling its service performance obligations to the company and meeting agreed-upon performance levels.
Common KPIs for a VoIP service provider like RingCentral for Desktop would include network service availability and uptime, call setup response time, and network latency.
Once you define what to measure, responsibilities need to be defined and targets should be set.
|Network Uptime||Lightning Speed’s network availability will remain at the specified level over the set time period||99.9% per week|
|Incident Resolution||Lightning Speed must respond to and resolve service interruptions within the specified period.||85% of incidents resolved within 48 hours of initial support contact|
|Call Quality||Lightning Speed will provide high-quality audio calls to Addams Sales employees and customers||90% of calls must achieve at least a ⅘ on the defined metric of service chart|
|Dropped Calls||Lightning Speed’s network will not exceed a set percentage of dropped calls per week||Less than 3% of all incoming and outgoing calls dropped per week|
Service Levels and Responses
Now that responsibilities like preventing packet loss have been clearly defined, they need to be prioritized.
Companies should decide not only the order in which potential issues should be addressed but also the required response time so their workflow is not interrupted.
This is also the section to address the overall severity level of specific issues, so the external IT service provider understands which problems to focus on first and the overall timeframe they have to fix an issue.
|Level of Severity||Incident Description||Response Time|
|Highest Priority||VoIP service down||Immediate|
|High Priority||Dropped call rate exceeds standard||Within 30 minutes|
|Priority||Call quality lower than standard||Within 3 hours|
|Low Priority||Customer Support Request||Within one business day|
|Lowest Priority||Non-Urgent Support Request||Within two business days|
This section relates to the ways in which a provider will manage the services they are required to offer, such as a 99.99% uptime.
This means outlining what is expected to be contained within a monitoring report, the ways in which the services will be monitored to ensure they meet the set standards, and how often these reports are required.
Monitoring/Reporting Process and Frequency
This defines how the service provider will evaluate, monitor, and test the efficacy of their services in real-time and at pre-determined intervals.
It outlines the information that should be contained in reports given to the company, as well as how often testing and monitoring should be conducted.
|Standard/Service||Monitoring Process||Report Contents||Frequency|
|Service Uptime||Automatic Updates, server request response time monitoring, etc.||Percentage of site uptime, identification of threats, outage resolution time||Monitored 24/7, reports generated weekly|
Support Availability Requirements
Here, the standards for service provider support availability are set.
This specifically relates to the dates, times, and types of support that must be available. Types of support could include a 24/7 service desk, in-person service, or even social media messaging.
Lightning Speed will have support services on hand during the following times:
- Online Chat Support: 24/7
- Email Support: Monday to Friday, 9:00 AM to 5:00 PM from January 2 to December 23rd
- Telephone Support: Monday to Friday, 9:00 AM to 5:00 PM from January 2 to December 23rd
Limitations and Exceptions
This section clearly states situational exceptions wherein either party would not be held responsible to meet the demands of the SLA.
- Lightning Speed shall not be held financially responsible for incidents that occur as the result of an unforeseen natural disaster.
- From December 23rd to January 2nd of each year this agreement remains valid, Lightning Speed shall have up to one business day to address all incidents aside from security breaches and network downtime.
Incident Resolution and Penalties
The dispute/incident resolution and penalties section clearly states the ways in which either party will attempt to resolve a specific incident or respond to a failure in service delivery.
Penalties may include service credits, percentages off, delayed payments, or waived cancellation fees.
In some cases, these responses will require an extension of the agreed-upon resolution, especially in cases where new hardware must be purchased or the services provided must be restructured to meet the standards of service.
In addition to outlining the actions to be taken after an incident, this part of the SLA should also define the penalties that either party will face if responsibilities and service standards are not met.
|Incident||Resolution Process||Penalty for Failure to Resolve|
|Number of dropped calls exceeds standard||Lightning Speed addresses relevant hardware,||5% reduction in monthly service charge|
Though an indemnification or “hold harmless” clause is optional, it is recommended.
This clause states that the service provider (Lightning Speed) will have to pay the company (Addams Sales) the cost of litigation from third-parties as a result of a breach of warranty.
When an organization and a supplier are in a business relationship that involves outsourcing, this is usually managed through an agreement. It may involve financial or other types of penalties if the conditions in the agreement are not met.
Why Do You Need an SLA?
Service level agreements set quantifiable standards of success, keep both parties accountable, and offer legal protection to both parties regarding situations outside of their control.
Though evaluated metrics, monitoring business processes, and recourse for unmet service standards will vary based on the specifics of each individual agreement, having an SLA in place creates a solid foundation for future business relationships with service providers.