What is a Service-Level Agreement (SLA)?

A service-level agreement is critical for the 21st-century business.

For many businesses, there may seem to be a 100-mile gap between sales and marketing.

In a recent LinkedIn poll, 60% of respondents from around the world said they thought there may be a negative impact on financial performance if sales and marketing were not aligned.

However, there are many disconnects between the teams, from strategy to process.

Making a service level agreement is one of the most essential procedures for coordinating your sales and marketing operations.

A Service-Level Agreement typically specifies the precise services that a customer will receive from a service provider.

Sales and marketing agreements are among the most important SLAs because they also serve internal operations.

What is an SLA?

The SLA specifies the service level the client expects, the performance metrics, and potential penalties for non-compliance.

SLAs can exist between two departments inside a firm, although they typically exist between businesses and outside suppliers.

For example, a telecom company’s SLA might guarantee network availability of 99.999%.

That equates to about five and a half minutes of downtime per year.

Five and a half minutes of downtime per year can still be too long for some businesses.

Moreover, the agreement might reduce the customer’s payment by a specific percentage if the service level is not met.

Read: Tailored Business Intelligence Tools for Strategic Decision-Making

Who Provides the SLA?

The service provider develops and offers the SLA.

This enables the business to modify its multiple SLAs to satisfy particular service and customer needs.

A business may offer multiple SLAs for a single service, each reflecting different service levels and pricing.

SLAs, however, may benefit the service provider over the client because the vendor typically creates them.

As a result, clients should be encouraged to evaluate SLAs before committing to them and seek legal assistance if necessary.

This will help avoid situations when clients may feel misled.

Read: Legal Management Tools: Boost Your Business Growth Easily

Why Are Service-Level Agreements Important?

A service-level agreement is important because it:

1. Protects both parties

The Service-Level Agreement typically specifies the precise services that a customer will receive from a service provider.

It establishes criteria for the service, ensuring that both the service provider and the end user have clear expectations.

Clear, quantifiable criteria help the end user know exactly what to expect and what is expected of them.

2. Gives peace of mind

The SLA provides peace of mind by holding the service provider accountable throughout the contracting process.

3. Provides recourse for unmet expectations

If a service provider doesn’t fulfil its responsibilities to the end user, the SLA specifies what will happen.

What will happen if one or both parties don’t live up to expectations is unclear without the SLA.

A service-level agreement ensures openness regarding the goals for each service level and what will happen if they are not achieved.

4. Providing clear metrics

An SLA defines the metrics by which service levels will be monitored and outlines the specifics of the services themselves.

These rules make it easier for both parties to comprehend and evaluate the service’s efficacy and compliance with the contract’s requirements.

There should be no space for doubt regarding whether critical KPIs are being fulfilled by the measurements specified in the SLA because they must be explicitly defined and properly quantified.

Read: Legal Basics of Starting a Business: What to Know

Types of Service-Level Agreements

1. Customer Service Level Agreement

A Customer Service Level Agreement (CSLA) is a type of Service-Level Agreement (SLA) that outlines the specific service levels and performance targets that a service provider is expected to meet when providing services to a customer.

The CSLA is typically used to establish a formal agreement between the service provider and the customer, setting out the terms and conditions of the service being provided.

The CSLA typically includes details such as the expected level of service, the responsibilities of both the service provider and the customer, and the consequences of any breaches of the agreement.

It may also include financial terms and conditions, such as payment terms, billing cycles, and any discounts or incentives the service provider offers.

It’s an important document that helps to ensure that the service provider meets the customer’s expectations and that the customer receives the level of service agreed upon.

By clearly defining the terms of the service, it can also help to prevent misunderstandings or disputes between the service provider and the customer.

2. Internal Service Level Agreement

An Internal Service Level Agreement (ISLA) is a type of Service-Level Agreement (SLA) that is used within an organization to define the terms and conditions of a service provided by one department or unit to another within the same organization.

ISLAs are typically used to establish clear expectations and responsibilities between different organisational departments or units.

They may be used to outline the level of service expected, the performance targets that the service provider is expected to meet, and the consequences of any breaches of the agreement.

It can help ensure that different departments or units within an organization work effectively and efficiently together and that each unit meets the needs and expectations of the other units it serves.

They can also help improve communication and cooperation within the organization and prevent misunderstandings or disputes between different departments or units.

3. Multilevel Service Level Agreement

A Multilevel Service Level Agreement (MLSLA) is a type of Service-Level Agreement (SLA) involving multiple parties or service levels.

MLSLAs are often used in complex, multi-tiered service environments, where multiple service providers may be involved in delivering a service to a customer.

In an MLSLA, each service provider typically has its own SLA with the customer, outlining the terms and conditions of the service it provides.

However, additional agreements may also exist between the different service providers, outlining their responsibilities and expectations towards each other in delivering the overall service to the customer.

MLSLAs can help ensure that all parties involved in delivering a service are working effectively and efficiently together and that the customer is receiving the level of service agreed upon.

They can also help improve communication and cooperation between different service providers and prevent misunderstandings or disputes.

Read: Why Customer Relationship Management (CRM) is Crucial to Business Success

How to Write a Service-Level Agreement

Here are some steps you can follow to write a Service-Level Agreement (SLA):

1. Identify the parties involved: Start by identifying the service provider, customer, and any involved subcontractors or third-party vendors.
   
   
2. Define the scope of the service: Specify the services or tasks covered by the SLA. Ensure both parties clearly understand expectations.
   
   
3. Establish service levels and performance targets: Use specific SLOs to set service levels and performance targets. This includes uptime, response times, and performance metrics.
   
   
4. Outline responsibilities and expectations: Detail the responsibilities of both the service provider and the customer. This includes equipment maintenance and issue resolution.
   
   
5. Include financial terms and conditions: Specify payment terms, billing cycles, and any discounts or incentives offered by the service provider.
   
   
6. Include any additional terms and conditions: Finally, add relevant terms like confidentiality clauses or liability limitations to ensure comprehensive service coverage.

Being detailed and specific in the SLA helps both parties understand expectations and ensures the service is delivered as agreed.

It may also be helpful to consult with legal counsel to ensure the SLA is legally enforceable.

Conclusion

In conclusion, a well-crafted Service-Level Agreement (SLA) is essential for aligning sales and marketing efforts.

It ensures clear expectations and protects both parties involved.

By defining precise service levels, responsibilities, and performance metrics, SLAs foster accountability and provide recourse for unmet expectations.

For internal teams or external clients, SLAs bridge gaps, enhance communication, and help prevent misunderstandings.

Following the outlined steps, businesses can create effective SLAs that drive collaboration and deliver consistent, high-quality service.

This will ultimately improve business outcomes.

Before you go…

Hey, thank you for reading this blog to the end. I hope it was helpful. Let me tell you a little bit about Nicholas Idoko Technologies.

We help businesses and companies build an online presence by developing web, mobile, desktop, and blockchain applications.

We also help aspiring software developers and programmers learn the skills they need to have a successful career.

Take your first step to becoming a programming boss by joining our Learn To Code academy today!

Be sure to contact us if you need more information or have any questions! We are readily available.