Why do you need an SLA? Service Level Agreement in the Netherlands
Many businesses face SLAs in various digital aspects of their operation. We rely on telecom companies for our network availability, we outsource Service desks, we use third-party API for our applications, and more.
SLA is not usually displayed to physical persons, but as a business customer, you can negotiate the terms of the agreement and initiate this document to be signed. In particular, you initiate an SLA when your company is a provider of some IT services.
In this blog post, we will present an overview of the type of document called an SLA, when companies conclude it, and how it helps the business to be satisfied by the service provided and to avoid conflicts. We'll also look at how to create an SLA from a scratch and manage changes in it over time.
What is Service Level Agreement
A service level agreement (SLA) is usually a contract between a service provider and a customer which defines a certain quality level at which service will be delivered by one party to another party.
A customer states in an SLA the standards and levels of service which are required for his good business performance. A vendor agrees to provide a quality of the service. To ensure this quality, a monitoring system is established in this document.
For monitoring, SLA includes metrics and a protocol for managing them. It means that the service levels should be regularly measured. If the agreed-on levels are not achieved, a breach is detected. Then a vendor must improve the service and the customer can apply penalties.
Service level agreement states a dispute resolution process for both parties and guarantees that a customer’s expectations of the service will be met. It’s also a flexible document that describes the mechanism for updating the agreement as adding and removing metrics, for instance.
An SLA differs from an operational level agreement (OLA) because it is an agreement with an external vendor while an OLA is designed for employees within an organization. Also, in a contrast to KPI, an SLA reflects the measures in an interaction with your counterparty, and not within your team.
Typical Cases of Using SLA
In fact, you could enter into an SLA each time you purchase any IT services from another company. At the very early stage, when you send out requests for proposal (RFP), you’d better include expected service levels as part of the request. It helps to get more appropriate offers and prices.
Then you just have to put these expectations in the SLA. Vendors usually have an SLA template for business customers. If a service level agreement is not provided by default, you always get to ask for concluding it. Especially since discussing SLA gives you room to negotiate the terms of the service.
If your company provides services on the enterprise level, you normally initiate an associate SLA to a contract. There are several reasons why SLAs are used by many IT service providers:
setting a mutual understanding of the service - regardless of a customer's knowledge of IT, stakeholders get clear metrics to control.
formalizing communication - SLAs explain to both parties how to act in the event of a breach or change.
prioritizing requests - SLAs define the urgency of incoming issues and pin aspects of the service which are the most important for a customer.
Service level agreements in the Netherlands are most commonly used in the IT industry. An SLA is also popular, in particular, for API providers, cloud service providers, Help desks, monitoring, mail delivery, and so on. There’s no closed list here, you can apply an SLA to any service it’ll be suitable for.
How to Select Metrics for an SLA
Given that a certain level of the service is a key component in an SLA, you have to considerably select metrics to measure this level. While selecting, adhere following principles:
include the metrics that your service provider can control;
choose metrics that can be easily (automatically if possible) collected;
take the minimum number of metrics;
prefer the metrics that produce the minimum amount of data;
define metrics as simple as possible;
and finally, set reasonable quality thresholds for the metrics. If your company doesn’t have historical measurement data, write down a process to review and readjust the thresholds in the future.
Specific kinds of metrics are selected depending on the service and your customer. For e-commerce companies, for example, uptime (target availability) is a critical kind of measurement.
Companies that outsource coding or app development take such metrics as defect rates and technical quality characteristics. While other companies use general business results as SLA metrics.
As a rule, service providers usually proceed from a standard SLA or some template and tailor it to the needs of their customers.
How SLAs work
Aside from regular monitoring and meeting the agreed-on levels, there are two more courses of events described in an SLA - breaches and changes. What is important in a case of breaches, is that remedies to improve a poor performance of the service plays a bigger role than financial penalties.
Under the SLA, service providers and a customer focus on root cause analysis and implement an action plan of remedies to compensate for poorer performance and reach the expected level of service. If a vendor cannot meet this quality level in principle, then another solution is usually offered.
As mentioned above, a service level agreement is a flexible document that is updated and revised during the term of the contract. When circumstances change, the SLA settings should be changed respectively. The circumstances to review your SLA might be as follows:
In this way, your SLA must be updated for new, higher requirements. At the moment it may be challenging for a service provider, but in the long term, the changes will pay off and help you to keep the customer satisfied.
On Enty Control Panel, you can easily create and edit service level agreements with your counterparties. Generate a document in a matter of minutes, send it to your customer, and make changes when needed. The templates are created by Dutch contract lawyers and are suitable for any service.
