In the fast-paced landscape of modern business, Service Level Agreements have emerged as indispensable tools, especially for businesses offering outsourced services, technology or software-related solutions.
Whether you’re a service provider or a client engaging with such services, the importance of Service Level Agreements (SLAs) can’t be underestimated.
If you’ve encountered SLAs or been requested to sign one, you might be eager to delve deeper into their true purpose and value. Understanding their essence, key components, and how they establish a mutually beneficial relationship between parties is essential in today’s competitive market.
This article aims to clarify SLAs, explaining their nature, importance and key elements. We’ll also cover tips to help you create effective, custom-made SLAs for your business.
What is an SLA?
An SLA can be a stand-alone agreement, a schedule or an addendum to the main services agreement. The SLA will cover the commercial imperatives of the delivery side of the deal, as opposed to the core legal terms (which will usually be in the main agreement).
In short, it will set out the parties’ expectations regarding the level of services that will be supplied, including scope, timescales and service credits for non-adherence.
In certain parts, the SLA may be set out in a tabulated format instead of solely legal prose since their core purpose is practical day-to-day use within the business.
When are SLAs used?
Service Level Agreements are typically used to support outsourced services agreements and technology or software agreements, where an organisation relies on an external service provider for the day-to-day delivery of a time-critical function, where a certain required level of service is fundamental to the practical delivery of the contract.
As such, the SLA document is a fundamental aspect of the relationship – it underpins the core delivery expectations and provides a formalised structure around them.
What terms should be included in a Service Level Agreement?
It will be for the parties to agree on the precise details of the document based on their requirements. However, the following areas are typically included in SLAs for the reasons set out below:
- Support hours – it’s common for support hours to be stated so that it’s nice and clear when support is available. For international agreements, time zones should be considered and stated accordingly.
- Type of support – the type and extent of the support may be broken down and clarified – for example, the difference between general ‘Helpdesk Support’ and ‘Higher Level Support’ (which may require a greater depth of technical expertise).
- Scope of support – it can be helpful to clarify what’s considered in-scope and out-of-scope and how an out-of-scope determination should be announced.
- Applicable fees – linked to the scope are the applicable fees – in-scope support will likely be included within the existing services/support fee arrangement. In contrast, out-of-scope support may be chargeable at an additional time and materials rate.
- Support requests – it’s sensible to detail on a practical level how a support access request (sometimes known as a ‘ticket’) should be raised and what detail the customer should provide when submitting a ticket.
- Support access – the SLA should detail what’s provided on-site and off-site and the arrangements for access for both – such as remote long-in access arrangements, etc.
- Priority levels – it’s a good idea for the SLA to separate the various types of potential issues and their applicable priority levels, response times and reporting expectations. For example, a business-critical failure is likely to rank higher in priority than an isolated system defect or, lower still, a minor error.
- Service credits – a common system for dealing with situations where the supplier can’t comply with the SLA requirements is to use service credits. This typically entitles the customer to an agreed financial deduction from the service/support fees.
In conclusion, Service Level Agreements (SLAs) have become essential in today’s dynamic business environment, particularly for businesses providing outsourced IT services. As we’ve explored in this article, understanding the true purpose and value of SLAs is crucial for both service providers and clients engaging with such agreements.
When crafting an SLA, key components such as support hours, types of support, scope of support, applicable fees, priority levels, and service credits should be carefully considered to ensure clarity and smooth operations.
If you need assistance creating a robust and tailored SLA for your business, LawBite experienced lawyers can provide invaluable support. LawBite offers expertise in legal matters, including the formulation of SLAs, guiding you through the process with precision and professionalism.
By seeking professional help and ensuring your SLAs are well-crafted, you can foster stronger partnerships, mitigate risks, and drive successful service provision relationships.
Ashley Gurr is an expert contract lawyer at LawBite. Ashley has over 15 years of experience in private practice helping SMEs and in-house for an international consultancy group advising on commercial contracts and a multi-national utility giant in a contract strategy role.