Full Form of SLA – Service Level Agreement
The full form of SLA stands for Service Level Agreement refers to a fundamental agreement between the client/customer and the provider of service, SLA includes the limit of service to be provided, its quality and other terms to be met by both the parties in an agreement.
Components
Components here refers to things which are legally included in the Service Level Agreements by both the parties:
- Service to be provided and its quality.
- The performance level of service and accountability of the provider.
- Reporting and Monitoring of service
- Issue Resolving Techniques and time frame.
- Contingency for not meeting the service expectations.
- Penalties for breach of contract and who should meet with those fines.
Types
There are three types which are explained below.
#1 – Customer Level
- This type is prepared based on each and every customer’s needs and expectations.
- For e.g. A DTH provider has different channel packs based on the customer needs and cost.
#2 – Service Level
- This deals with the same or limited type of service for its customers.
- For e.g. A Two-wheeler company provides only 2 free services for first-year irrespective of its customer or what they purchased.
#3 – Multi-Level
- This type deals with all the above types in a single Agreement, it deals with the service level, corporate level or customer level under one or single contracts.
- For e.g. A cab providing company may deal with a single corporate customer but it has to provide cab facility to entire shifts in the corporate as well as different employees.
Why SLA Is Important?
An SLA is important for both the parties i.e. the customer as well as the service provider.
Customer Side:
These points show the importance of SLA as per the customer side
- The type of service and its level can be measured.
- Quality of service and metrics to measure or compare it with other service providers.
- What are the Issue’s may arise or covered and their resolving part?
- The customer part and their responsibilities are also mentioned in the SLA’s.
Provider Side:
As per provider an SLA’s must cover these points.
- Customer details and what service they are agreed upon?
- Level, cost of service and time of service agreement.
- What issues are covered and the time frame for readdressing it.
- Roles and Responsibilities as a service provider.
- The part which they are not liable.
Who Needs SLA?
Every standard Service Provider or Providing company needs an SLA for negotiating with the customer. Many customers need SLA to compare with different vendors and ask for better services. A Service Level Agreement is needed by both the customer as well as the provider for better understanding their part.
How to Set Metrics?
Here we will see how to set metrics in the Service Level Agreement.
Metrics
- A metric here refers to standards for measuring the performance of a service provider. There are some basic metrics and additional metrics can be set based on the service to be provided.
- Metrics should be simple that even a layman can understand and it should not mislead the customer about the service. If they are not able to understand how to measure the service then it leads to confusion on both sides. The following the basic metrics to be considered while Setting the Metrics part in an SLA.
Basic Metrics
- Availability/time of Service Period and Cost: If the service can be provided on the client’s place and how long it will be provided.
- Error Log: How to deal with failures or mistakes in the service provided.
- Technology used: If it’s a technology-based service, what technology they are using should be mentioned.
- Security and Other Preventive Measures: How far the client’s information will be confidential and what are the preventive measures available.
- Past Business Outcomes: How well they performed in the previous service’s.
These are general points to be considered before setting the Metrics of an SLA, as these metrics lead the Service in Right Path and eliminate extra costs.
Examples
Let’s consider we are an Event Management service provider and based on the type of customer the service is provided, Here SLA will be Multi-level as they deal with different sets of customers
If there is an event for corporate customers, it will be organized in a different way and if there is any individual customer who wants to celebrate his birthday, then the theme will be based on his need. Likewise, the Service provider itself will arrange shows, hence the service differs as per customer and Service Level Agreement will also be prepared as per the need.
The SLA of an Event Management company will include
- About the company and its past works.
- Various events they are organizing
- Type of service they are arranging and customer details.
- Customers need the theme, color, etc.
- Cost for the whole event
- Customer side responsibilities and payment details
- Discounts if any in case of failure to fulfill any of the customer’s needs they agreed upon.
Conclusion
A Service Level Agreement is an important part of service type, as it gives the customer a clear picture of the service and the provider’s responsibilities. If there is no SLA a customer can expect too much and if it’s not provided he may refuse to pay, at the same time a provider can deny that some service is not covered.
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This has been a guide to the Full Form of SLA and its definition. Here we learn the components, types, and examples of SLA along with its importance and needs. You may refer to the following articles to learn more about finance –
