What Are the 3 Types of SLA? | Service-Level Agreements

What are the 3 types of SLA? Before we dive into that, let’s define what an SLA is! 

A service level agreement (SLA) is defined as a contract between the provider of a service and its consumers. It details the services the provider will offer and states the standards that the provider will uphold. 

Any service provider, whether a network or cloud service provider, or a managed service provider, requires an SLA. These contracts aid with managing the expectations of customers. Basically, an SLA gives providers the power to state what they are or aren’t responsible for. That is, in the way of performance issues or outages. For the customers’ sake, an SLA can be good. The contract defines the service’s performance and the methods for remedying any service issues. 

An SLA will usually be integrated into the service provider’s master service agreement (general terms and conditions). SLAs were originally used to establish the amount of support a software, hardware, or networking company would provide to consumers who ran technologies in offices and data centers. Over time, the application of SLAs changed. As information technology (IT) outsourcing became more widespread, they shifted. Now, SLAs govern the relationship between the service provider and the customer. 

Today, SLAs are used across a broad range of IT-related industries. Such as IT service providers, managed service providers, internet service providers, and cloud computing. A corporate IT company, for example, may use SLAs for several departments within the company. The SLA allows an IT department to measure, compare, and justify their services. 

What Are the Components of an SLA? 

To start with, an SLA contains an agreement overview, which defines the involved parties, the beginning date, and an introduction of the services that will be provided. 

A detailed description of services will also be in the SLA. That means, what services are offered, how they’re delivered, if maintenance is offered, operational hours, a process outline, and a breakdown of the applications and technologies used. 

The SLA will also specify exclusions – that which isn’t offered. 

The service performance is another part of the SLA. This section pertains to the list of metrics the client and service provider agree to that will be used to measure the provider’s service levels. 

Then there’s redressing, or the compensation/payment made to the consumer if the provider fails to fulfill the obligations set forth in the SLA. 

The SLA also includes definitions of all parties involved, as well as the responsibilities of the parties – known as stakeholders. 

Another important aspect is security. The SLA defines the security measures the service provider will take – often this includes nondisclosure agreements and IT security. Risk management and disaster recovery are in the SLA, as well. 

The structure of the reporting, the tracking intervals, and stakeholders are defined in the service tracking and reporting section. While the periodic review and change processes section addresses how key performance indicators (KPIs) will be reviewed. And, the SLA will need to define the causes for termination or expiration of the agreement (along with a notice period). Of course, the SLA requires signatures by the stakeholders and authorized participants to approve. 

So, What Are the 3 Types of SLA? Customer, Internal, and Multilevel 

A customer service-level agreement is between the service provider and its customers, either external or internal. These are created by negotiation between the customer and service provider, defining the relationship and expectations. These SLAs should include the details of the service, the standards of the service across all levels, provisions of service availability, and the responsibility of each party. Additionally, the customer service-level agreement defines the procedure for escalation, the penalty for not achieving SLA metrics, and the terms for the agreement’s cancellation. 

An internal SLA is a contract between an organization and its internal customers, like a company’s IT department. This SLA defines the expectation of operational performance within a company’s department. Internal SLAs allow internal teams to track performance with a reasonable amount of predictability, so that the organization can thrive and hit expected performance targets. 

Meanwhile, a multilevel SLA is a contract that divides the agreement into specific levels applicable to the various customers who use the service. For example, Google, which is a software as a service provider (SaaS), offers a basic package of services and support, but they also have paid tiers that offer more comprehensive services. The levels of Google’s services are defined in their multilevel SLA. 

Enforcement Is Necessary to Verify the Level of Service Provided

In order to verify the appropriate level of service provided, enforcement is necessary. Many service providers provide the statistics of their services via online portals. The customer can use the portal to track the service levels. If the levels are insufficient, the customer may be eligible for compensation. If a third-party company is controlling the systems and processes of a service provider, they should be part of the SLA negotiation. An indemnification clause should also be in the SLA so that the customer knows what they aren’t responsible for if a violation occurs. Likewise, service-level penalties should be established. 

SLAs can further state what metrics can be used to set customer expectations. These include uptime and availability, performance benchmarks, response/resolution time, business results, abandonment/error rate, resolution, recovery/repair time, security, and more.   

When should an SLA be revised? As a living document, an SLA ought to be reviewed on a regular basis and updated with any new information, once or twice per year. If a customer’s business requirements were to shift, if metrics or processes improve, if services are added or taken away, or if technology advances – these are among the reasons why an SLA would be revised. 

If your business needs a service level agreement, our team at Stockman & Poropat, PLLC can help! Contact us today for a free consultation. We can answer all of your questions and set your business up for success.  

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