What is a Service Level Agreement (SLA)?
The service provider and the client agree on a service outline. The service provider must often detail the performance metrics, responsibilities, guarantees, and expectations that they must meet.
In project management, an SLA can outline the project’s timeline, work quality, and communication rules.
Why is SLA Important?
SLAs play a crucial role in ensuring that both parties have clear expectations. Here’s why they’re indispensable:
1. Accountability: SLAs hold service providers accountable, ensuring they deliver as promised.
2. Transparency: They provide a clear framework for understanding service expectations and potential penalties for non-compliance.
3. Trust: By setting clear expectations, SLAs foster trust between the service provider and the client.
4. Conflict Resolution: In case of disagreements, SLAs serve as a reference point, helping in efficient project financial management.
How to Calculate SLA?
SLA Percentage = (Total Time − Downtime / Total Time) × 100%
The Total Time measures the total duration that the service is measuring.
Downtime is the total duration the service was unavailable during the measurement period.
Let’s say you have a cloud service that promises an SLA of 99.9% over a month. For simplicity, let’s consider a month to be 30 days.
Total Time for a month = 30×24
30×24 hours = 720 hours
If in a particular month, the downtime was 1 hour:
SLA Percentage=(720 hours−1 hour/720 hours)×100
This means the service did not meet its SLA of 99.9% for that month.
SLA vs Other Related Agreements
People often confuse SLAs with other agreements like:
Operational Level Agreement: While SLAs are client-focused, OLAs define inter-departmental service expectations. For instance, in resource management, an OLA might specify internal timelines.
Underpinning Contracts: These are external contracts with third parties that support the service provider’s SLA commitments. For example, a deal management software might have an underpinning contract with a cloud service provider.
|Service Level Agreement (SLA)
|Operational Level Agreement (OLA)
|Underpinning Contract (UC)
|An agreement between a service provider and its customer or end-user. It specifies the level of service to be delivered.
|An agreement between internal teams of a service provider. It supports the delivery of the SLA.
|An agreement with an external provider to ensure they meet the levels required to fulfill the SLAs and OLAs.
|Define the level and quality of service to be provided to the customer.
|Define the level and quality of service to be provided by one internal team to another.
|Outline terms and conditions for third-party suppliers.
|Directly with the customer or end-user.
|Internal to the organization or service provider.
|External, between the service provider and third-party suppliers.
|Service description, performance metrics, responsibilities, penalties, etc.
|Roles, responsibilities, and performance metrics among internal teams.
|Terms of service, pricing, penalties, and legal conditions.
|End-to-end service from the customer’s perspective.
|Individual parts of the end-to-end service.
|Ensuring third parties deliver to their commitments to support the SLA.
How is SLA Used in Business?
SLAs are versatile tools used across various business functions:
1. IT and Software: SLAs define uptime, maintenance, and support for software products like finance management software.
2. HR: In employee 360 evaluations, SLAs can set expectations for feedback timelines.
3. Sales and Marketing: SLAs can determine lead response times or sales pipeline management metrics.
4. Customer Support: SLAs might specify response and resolution times in platforms like ticket management systems.
Ready to Optimize Your SLA?
For businesses looking to optimize their SLAs, KEBS offers a robust solution. Whether it’s streamlining project financials or ensuring timely resource allocation, KEBS has got you covered. KEBS, a renowned PSA Software, offers tools that help businesses monitor and achieve SLA compliance:
- Automated Alerts: If there’s a risk of breaching an SLA, KEBS sends automated alerts, allowing businesses to take corrective action.
- Detailed Reporting: KEBS custom reporting capabilities allow businesses to analyze SLA performance over time, driving continuous improvement.
Ready to Optimize Your SLA Compliance with KEBS? Dive deeper by exploring KEBS PSA software or contact us for a personalized demo.