Service Level Agreements
A service level agreement (SLA) is a contract between a service provider and a company.
It specifies the level of service expected during its term: network availability, data
delivery ratios, response times, mean (average) time to resolve problems, speed of
installation, amount/availability of technical support, and so forth. SLAs can range from
being very general to being extremely detailed. Many questions surround service level
agreements, such as How much information must be included? Which are the best
practices in defining SLAs?
Some industry analysts suggest that a SLA should not be a complex set of agreements.
Instead, it should be a clear record of vendor promises. The SLA should include a
specific definition of the services the provider will offer, including stated minimum
service levels for each service. In addition, SLAs should clearly specify service level
performance measures. For example, it could be misleading for a long-distance provider
to report the performance of their own networks, but not the impact of other
providers/partners in their networks that customers must go through in order to gain
access to the long-distance provider’s network. For example, customers might be enticed
to sign up for Sprint’s 100 percent reliable long-distance services, even though local
phone companies may not have enough capacity to ensure that Sprint subscribers can
connect to the Sprint network 100 percent of the time. In general, the SLA should cover
the entire network, including those sections operated by other carriers. Otherwise,
different SLAs should be created for each provider.
Customers should also develop their own processes to track the network’s performance.
In this way, customers can convene monthly or quarterly meetings to review the
performance according to the SLA’s standards. A growing number of vendors are
offering products that make it possible to monitor the extent to which service delivery
actually conforms to the promises contained in service level agreements. For example,
Keynote Systems has a program installed in several U.S. cities that is capable of testing
the availability network services and the round-trip response time of Web-based
applications. ADC software has a program that interprets the network data and even
provides a Web report capability that displays service departures from the levels specified
in the SLA.
Some customers are incorporating metrics derived from third-party performance
monitoring companies into the SLAs they sign with network services companies. Global
Sports, for example, has signed SLAs that guarantee user response time and application
availability through metrics provided by the Red Alert service from Keynote Systems.
This service level guarantee has allowed Global Sports to gain the trust of several major
companies, including Kmart, which selected Global Sports to run its BlueLight Web site.
Additionally, SLAs should define the types of specific skills of the technical support staff
of network service providers. Many agreements require the service provider to provide
the names and numbers of senior officials to be contacted in case of problems. This
information is important because the degree to which a service provider guarantees a
level of service is directly related to the technical ability of the staff that is responsible for
ensuring the availability of network services for customers. Although the SLA cannot
guarantee the continuity of all vendors’ technicians, it can set a standard for the people
assigned to provide service for particular customers.
The SLA should also include penalties, like “fines” or reimbursements, in case the
service provider does not meet the required service levels. In general, penalties are
calculated as a percentage of the monthly service charge, depending on the type of
problem. Penalties are important not only because they ensure payment reductions if
something goes wrong. They also help to ensure that the service provider pays attention
to customer needs.
Business continuation and transition clauses are also essential parts of the SLA. A
transition clause establishes criteria for a smooth termination of the contractual
relationship. This clause is important because companies must have the ability not only to
finish an agreement for any reason, but also to ensure an efficient transition of services,
software (licenses), and equipment to another provider. A business continuation clause
gives customers the right to continue receiving services for a specified time period after
the contract expires. It usually provides a way to maintain previously negotiated pricing
structures and service levels.