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Service Level Agreement (SLA)

Service Level Agreement (SLA)

In layman’s terms, a service level agreement (SLA) is a settlement between you and your customers that tells the terms that both the parties have mutually agreed to while in a transaction. These agreements are usually made for the business and its external links but they may exist for internal departments too. A service level agreement has various components which are discussed as follows - 

  • Agreement overview. It includes the basic details of the agreement like the parties involved and date etc. 
  • Description of services. It contains all the details of the agreement including what services will be offered in which situations. It also states the working hours and tells which all technology and applications are used. 
  • Exclusions. To avoid confusion and eliminate the scope of assumptions, we should also include which all services will not be offered. 
  • Service performance. Performance measurement metrics and levels are defined. The client and service provider should agree on a list of all the metrics they will use to measure the service levels of the provider.
  • Redressing. Compensation should be clearly defined if the provider fails to fulfill its SLA.
  • Stakeholders. It tells about the parties involved and their responsibilities. 
  • Security. All security measures that will be taken by the service provider should be stated beforehand.
  • Risk management and disaster recovery. The risk management process and disaster recovery plan should be clearly communicated.
  • Service tracking and reporting. This section is about the reporting structure, tracking intervals and stakeholders involved in the SLA.
  • Periodic review and change processes. The SLA should be reviewed regularly and if any changes are to be made then the process should be stated in advance.
  • Termination process. The SLA should also include a clause to terminate or expire the agreement in any situation. Notice period should also be written. 
  • Signatures. Finally, all the parties involved should sign the contract. 

Types of Service Level Agreements

There are three types of service level agreements. They are- customer-based service level agreement, service-based service level agreement, and multi-level service level agreement.

  1. Customer-based SLA: It is an agreement done with a single customer that contains all the relevant services required by the customer. Generally, such agreements leverage a single contract, which is convenient for the vendor because of its simplicity. For example, telecommunications services will include voice calls, internet service, and messaging, all this will be under one agreement. 
  2. Service-based SLA: It is a contract that includes one type of service for all its customers. The SLA is limited to one standard which cannot be changed hence making it simple for the vendors. For example, an SLA governing how the helpdesk resolves queries will be the same for all the customers.  
  3. Multi-level SLA: In such an agreement, the user has the option of customization according to his/her needs; the user can add conditions as per his/her requirements to create a suitable service. Users may integrate multiple conditions in the same system. 

Importance of Service Level Agreements

Service level agreement is important for your organization due to multiple reasons. Most importantly, it protects the reputation and assets of your brand. Other reasons are - 

  • With the help of SLAs, you clearly state your expectations from the service provider. You get to know what you are paying for and can hold the service provider accountable for not meeting the said terms. 
  • If the said terms are not met by your service provider, then you can ask for some compensation as the SLA will act as proof stating the obligations. Therefore, an SLA should include consequences and an alternate plan of action if the said is not met. 
  • The contract provides peace of mind to both parties as everything is stated clearly in the agreement. There is no scope for missing out on things when everything is on paper.
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In layman’s terms, a service level agreement (SLA) is a settlement between you and your customers that tells the terms that both the parties have mutually agreed to while in a transaction. These agreements are usually made for the business and its external links but they may exist for internal departments too. A service level agreement has various components which are discussed as follows - 

  • Agreement overview. It includes the basic details of the agreement like the parties involved and date etc. 
  • Description of services. It contains all the details of the agreement including what services will be offered in which situations. It also states the working hours and tells which all technology and applications are used. 
  • Exclusions. To avoid confusion and eliminate the scope of assumptions, we should also include which all services will not be offered. 
  • Service performance. Performance measurement metrics and levels are defined. The client and service provider should agree on a list of all the metrics they will use to measure the service levels of the provider.
  • Redressing. Compensation should be clearly defined if the provider fails to fulfill its SLA.
  • Stakeholders. It tells about the parties involved and their responsibilities. 
  • Security. All security measures that will be taken by the service provider should be stated beforehand.
  • Risk management and disaster recovery. The risk management process and disaster recovery plan should be clearly communicated.
  • Service tracking and reporting. This section is about the reporting structure, tracking intervals and stakeholders involved in the SLA.
  • Periodic review and change processes. The SLA should be reviewed regularly and if any changes are to be made then the process should be stated in advance.
  • Termination process. The SLA should also include a clause to terminate or expire the agreement in any situation. Notice period should also be written. 
  • Signatures. Finally, all the parties involved should sign the contract. 

Types of Service Level Agreements

There are three types of service level agreements. They are- customer-based service level agreement, service-based service level agreement, and multi-level service level agreement.

  1. Customer-based SLA: It is an agreement done with a single customer that contains all the relevant services required by the customer. Generally, such agreements leverage a single contract, which is convenient for the vendor because of its simplicity. For example, telecommunications services will include voice calls, internet service, and messaging, all this will be under one agreement. 
  2. Service-based SLA: It is a contract that includes one type of service for all its customers. The SLA is limited to one standard which cannot be changed hence making it simple for the vendors. For example, an SLA governing how the helpdesk resolves queries will be the same for all the customers.  
  3. Multi-level SLA: In such an agreement, the user has the option of customization according to his/her needs; the user can add conditions as per his/her requirements to create a suitable service. Users may integrate multiple conditions in the same system. 

Importance of Service Level Agreements

Service level agreement is important for your organization due to multiple reasons. Most importantly, it protects the reputation and assets of your brand. Other reasons are - 

  • With the help of SLAs, you clearly state your expectations from the service provider. You get to know what you are paying for and can hold the service provider accountable for not meeting the said terms. 
  • If the said terms are not met by your service provider, then you can ask for some compensation as the SLA will act as proof stating the obligations. Therefore, an SLA should include consequences and an alternate plan of action if the said is not met. 
  • The contract provides peace of mind to both parties as everything is stated clearly in the agreement. There is no scope for missing out on things when everything is on paper.
free conversion rate optimization audit