A formal agreement between an internal provider and an internal receiver (customer).
A service-level agreement is a part of a service contract where the level of service is formally defined. In practice, the term SLA is sometimes used to refer to the contracted delivery time (of the service) or performance. As an example, internet service providers will commonly include service level agreements within the terms of their contracts with customers to define the level(s) of service being sold in plain language terms. In this case the SLA will typically have a technical definition in terms of mean time between failures (MTBF), mean time to repair or mean time to recovery (MTTR); various data rates; throughput; jitter; or similar measurable details.
A service-level agreement is a negotiated agreement between two parties, where one is the customer and the other is the service provider. This can be a legally binding formal or an informal "contract" (for example, internal department relationships). Contracts between the service provider and other third parties are often (incorrectly) called SLAs – because the level of service has been set by the (principal) customer, there can be no "agreement" between third parties; these agreements are simply a "contract." Operational-level agreements or OLAs, however, may be used by internal groups to support SLAs.
The SLA records a common understanding about services, priorities, responsibilities, guarantees, and warranties. Each area of service scope should have the "level of service" defined. The SLA may specify the levels of availability, serviceability, performance, operation, or other attributes of the service, such as billing. The "level of service" can also be specified as "target" and "minimum," which allows customers to be informed what to expect (the minimum), while providing a measurable (average) target value that shows the level of organization performance. In some contracts, penalties may be agreed upon in the case of non-compliance of the SLA (but see "internal" customers below). It is important to note that the "agreement" relates to the services the customer receives, and not how the service provider delivers that service.
SLAs commonly include segments to address: a definition of services, performance measurement, problem management, customer duties, warranties, disaster recovery, termination of agreement. SLAs have been used since late 1980s by fixed line telecom operators as part of their contracts with their corporate customers. This practice has spread such that now it is common for a customer to engage a service provider by including a service level agreement in a wide range of service contracts in practically all industries and markets. Internal departments (such as IT, HR, and real estate) in larger organizations have adopted the idea of using service-level agreements with their "internal" customers — users in other departments within the same organization. One benefit of this can be to enable the quality of service to be benchmarked with that agreed to across multiple locations or between different business units. This internal benchmarking can also be used to market test and provide a value comparison between an in-house department and an external service provider.
Service level agreements are, by their nature, "output" based – the result of the service as received by the customer is the subject of the "agreement." The (expert) service provider can demonstrate their value by organizing themselves with ingenuity, capability, and knowledge to deliver the service required, perhaps in an innovative way. Organizations can also specify the way the service is to be delivered, through a specification (a service level specification) and using subordinate "objectives" other than those related to the level of service. This type of agreement is known as an "input" SLA. This latter type of requirement is becoming obsolete as organizations become more demanding and shift the delivery methodology risk on to the service provider.
Service level agreements at different levels, SLAs are also defined at different levels:
* Customer-based SLA: An agreement with an individual customer group, covering all the services they use. For example, an SLA between a supplier (IT service provider) and the finance department of a large organization for the services such as finance system, payroll system, billing system, procurement/purchase system, etc.
* Service-based SLA: An agreement for all customers using the services being delivered by the service provider. For example:
o A car service station offers a routine service to all the customers and offers certain maintenance as a part of offer with the universal charging.
o A mobile service provider offers a routine service to all the customers and offers certain maintenance as a part of offer with the universal charging
o An email system for the entire organization. There are chances of difficulties arising in this type of SLA as level of the services being offered may vary for different customers (for example, head office staff may use high-speed LAN connections while local offices may have to use a lower speed leased line).
* Multilevel SLA: The SLA is split into the different levels, each addressing different set of customers for the same services, in the same SLA.
* Corporate-level SLA: Covering all the generic service level management (often abbreviated as SLM) issues appropriate to every customer throughout the organization. These issues are likely to be less volatile and so updates (SLA reviews) are less frequently required.
* Customer-level SLA: covering all SLM issues relevant to the particular customer group, regardless of the services being used.
* Service-level SLA: covering all SLM issue relevant to the specific services, in relation to this specific customer group.
Service level agreements can contain numerous service performance metrics with corresponding service-level objectives. A common case in IT service management is a call center or service desk. Metrics commonly agreed to in these cases include:
* ABA (Abandonment Rate): Percentage of calls abandoned while waiting to be answered.
* ASA (Average Speed to Answer): Average time (usually in seconds) it takes for a call to be answered by the service desk.
* TSF (Time Service Factor): Percentage of calls answered within a definite timeframe, e.g., 80% in 20 seconds.
* FCR (First-Call Resolution): Percentage of incoming calls that can be resolved without the use of a callback or without having the caller call back the helpdesk to finish resolving the case.
* TAT (Turn-Around Time): Time taken to complete a certain task.
Uptime is also a common metric, often used for data services such as shared hosting, virtual private servers and dedicated servers. Common agreements include percentage of network uptime, power uptime, number of scheduled maintenance windows, etc. Many SLAs track to the Information Technology Infrastructure Library specifications when applied to IT services.