An SLA (Service Level Agreement) is an agreement that sets the minimum level of service a provider must deliver. It defines availability, response times, procedures for reporting problems and penalties for failing to meet the agreed terms. If you use IT services such as hosting, cloud software, telephony or office applications, an SLA protects you against losses caused by downtime and outages.
What is an SLA and what problem does it solve?
An SLA is an agreement on a guaranteed level of service. You agree specific parameters with the provider: what exactly must work, for how long, at what level of availability, and what will happen if something stops working.
An SLA serves two purposes:
- For you (the customer) – it gives you a guarantee that, in the event of an outage, the provider will respond within the agreed time and fix the problem. You do not have to look for outside help or incur additional costs.
- For the provider – it sets the limits of its liability. It protects the provider against claims that go beyond the agreed scope of services.
Every SLA has one feature in common: the scope of the service is always agreed individually with the customer.
Where did SLAs come from, and why do they matter in IT?
Mobile phone operators were the first to use SLAs. As services moved to the cloud, including virtual phone systems, office suites and messaging apps, guaranteed service levels became standard in agreements for remote services.
Why this affects your business
When you use remote services, you hand control of the infrastructure to the provider. The provider is responsible for servers, networks, power and equipment. You do not have access to those devices, so you have no control over how they operate.
If there is an outage, fire or break-in, your business depends on how quickly the provider responds.
Example: what happens without an SLA
Imagine this situation:
- Company X uses software purchased from Company Y.
- The system fails and work stops.
- Without an SLA, Company X has no guarantee of when the provider will respond or whether it will fix the problem within a specified time at all.
- With an SLA, the provider is required to take remedial action within the agreed time, on pain of financial penalties.
Every hour of downtime generates costs. A call centre that cannot make calls cannot sell, serve customers or conduct surveys, so it only generates losses.
What should an SLA agreement include?
To make sure an SLA actually protects you, check that it covers these elements:
Basic elements
- The parties to the agreement – who the provider is and who receives the service.
- Description of the service – exactly what the provider delivers and to what extent.
- Term – how long the agreement will remain in force.
- Service conditions – how and on what terms the service operates.
Operational parameters
- Minimum service availability – expressed as a percentage over the year.
- Response time – how long the provider has to take action after a problem is reported.
- Problem resolution time – the maximum time allowed to fix an outage.
- Problem reporting procedure – contact channels (email, telephone), availability hours and escalation path.
- Reporting and monitoring – how the provider collects statistics, makes them available and monitors service performance.
- Penalties for failing to meet the terms – specific financial consequences for improper performance of the agreement.
What deserves particular attention?
- Availability level – a 99% figure sounds good, but it means more than 3 days of unavailability a year (5,256 minutes). For larger companies, that can mean real losses. Check whether you accept this level of risk.
- Monitoring and reporting – agree how the provider measures availability, where it stores statistics and in what form it will send them to you.
- Emergency reporting channels – put specific email addresses and telephone numbers in the agreement. Specify the hours when you can report problems (for example, 8:00-16:00 if you do not operate around the clock).
Three types of SLA
| Type | Description | When to use it |
|---|---|---|
| Customer-based SLA | One agreement covers all services provided to one customer. | When a customer uses multiple services from one provider. It is simple to manage. |
| Service-based SLA | One agreement governs one service for all customers. | When a provider offers the same service to multiple customers on uniform terms. |
| Multi-level SLA | One agreement is divided into levels: different customer groups use one service on different terms. | When terms need to vary depending on the customer group. |
How is an SLA different from an ordinary agreement?
An ordinary agreement for the provision of services does not have to specify a guaranteed level of availability or response times. An SLA adds those parameters.
In practice, an SLA is usually not a separate document. It forms part of the agreement for the underlying service and operates as one of the provider’s commitments to the customer.
Decision rule: If your business depends on the continuity of a service provided by an external provider, you need an SLA. If an interruption to the service does not affect your revenue or operations, an ordinary agreement may be enough.
Checklist: what to agree before signing an SLA
Before you sign an SLA, check these points:
- Does the agreement specify the scope of the service and the conditions for providing it?
- Is the minimum availability level defined, and do you accept the risk of downtime associated with it?
- Are specific response times and problem resolution times included?
- Is the outage reporting procedure described, including channels, hours and escalation path?
- Has the provider committed to reporting and monitoring?
- Does the agreement provide for financial penalties for failing to meet the parameters?
- Are emergency contact details specified (email, telephone)?
- Does the agreement take your working hours and business operations into account?
Summary: what to remember about SLAs
An SLA is a set of specific commitments the provider makes to your business. It defines availability parameters, response times, remedial procedures and consequences for failing to perform the agreement.
A well-drafted SLA gives you three things:
- Predictability – you know what to expect from the provider in the event of an outage.
- Financial protection – contractual penalties motivate the provider to act quickly.
- Clear rules on responsibility – both parties know who is responsible for what and to what extent.
If you use IT services delivered remotely, review your current agreement. Check whether it includes the elements described above. If it does not, update it or negotiate new terms before the first serious outage occurs.
Frequently asked questions
What is an SLA agreement, and why does a business using IT services need one? An SLA (Service Level Agreement) is an agreement on a guaranteed level of service. In it, you agree specific parameters with the provider: what must work, at what level of availability, how quickly the provider must respond to an outage, and what consequences apply if it fails to meet the terms. If you use hosting, cloud software, telephony or office applications, an SLA protects you against losses caused by downtime because without one you have no guarantee of when the provider will respond or whether it will fix the problem within a specified time at all.
What should a well-prepared SLA agreement include? A well-prepared SLA covers the basic elements (the parties to the agreement, description of the service, term and service conditions) as well as operational parameters: minimum service availability expressed as a percentage, response time after a report, maximum problem resolution time, an outage reporting procedure with specific contact channels and an escalation path, reporting and monitoring rules, and financial penalties for failing to meet the terms. Also check whether the agreement takes your working hours and business operations into account.
What should you watch out for most before signing an SLA with a SaaS provider or another IT service provider? Check the availability level: a 99% figure sounds good, but it means more than 3 days of unavailability a year (5,256 minutes), which can mean real losses for many companies. Agree how the provider measures availability, where it stores statistics and in what form it sends them to you. Put specific email addresses and telephone numbers for emergency reports in the agreement and specify the hours when you can report problems.
What is the difference between an SLA and an ordinary agreement for the provision of services? An ordinary agreement for the provision of services does not have to specify a guaranteed level of availability or response times. An SLA adds those parameters. In practice, an SLA is usually not a separate document, but forms part of the agreement for the underlying service and operates as one of the provider’s commitments to the customer. Decision rule: if your business depends on the continuity of a service provided by an external provider, you need an SLA; if an interruption to the service does not affect your revenue or operations, an ordinary agreement may be enough.
How do you choose the right type of SLA for your business? If you use multiple services from one provider, choose a customer-based SLA: one agreement then covers all services and is simple to manage. If the provider offers the same service to multiple customers on uniform terms, use a service-based SLA. If terms need to vary for different customer groups using one service, a multi-level SLA with different access levels and parameters is suitable.
