Definitions: Service Level Agreement

Definition

The Service Level Agreement (SLA) is the section of an overall service agreement between two entities for the level of performance or delivery times to be maintained during the length of the contract. The two entities are usually known as the service provider and the  customer, and can involve legal agreements where monies are involved, or more informal contracts among internal business units.

An SLA is usually comprised of many sections that define the parties’ responsibilities, how the service is to be performed and guarantees or  warranties that are part of the agreement. Each service has a level of expectation that is agreed upon, but within the SLA there may be levels of availability, serviceability, performance, operation or other levels specific to the service itself. Also, the SLA will define the ideal target level as well as an acceptable minimum

Business Applications

By knowing thee expected level of service as well as the minimum level,  the customer can then use that service to its maximum. This is also very  helpful if the customer is an intermediary, who resells or bundles the service into a larger service that is being sold. SLAs have been in use since the early 1980's by landline telephone companies with their larger corporate customers and resellers of their service. The concept caught on, and other businesses and business units in larger companies began to use the terminology and ideals setup in those early telecommunication service contracts.

The idea of creating a larger service from smaller services almost requires SLAs from the upstream service providers.  For example, to have nationwide cell phone coverage,  you would not need to build towers and antennas all across the country. Instead you could find local and regional companies that offer the same service, write up an SLA and measure the results. The to your customers, you offer a similar SLA. In the event the original SLA is not met by the company from which you are purchasing, you can still control your costs when your customers abide by the SLA you have with them. This gives a company the ability to use many sub contractors to provide the greater service, yet control the costs and resources to offer larger products.

Concerns

With efficiency comes the possibility of corruption. When using the ideals set forth in IT service management, applying metrics to the process and guaranteeing delivery times is very good for management of manufacturing products. But when you apply this methodology to the call center, coding, or system design, reliability and creativity fade to the back in order to meet the SLA, and thus a company no longer provides the best service to the end customer.  By giving a defined, specific metric, delivering that exact idea becomes the goal, and often teams are forced to engineer to meet the deadline, not give the best possible product.

Technical Details

The use of SLAs has become widespread with the use of IT service management foundations such as itSMF or ITIL. A common use in IT service management is the  service desk also known as a call center.  Metrics in these cases are commonly identified as:

• ABA  (Abandonment Average): A percentage of inbound call hang-ups while waiting to  be answered.
• ASA  (Average Speed to Answer): An average number of seconds it takes for a call to  be answered by the service center.
• TSF  (Time Service Factor): A percentage of calls answered within a time frame, a  good example is saying 80% in 20 seconds.
• FCR  (First Call Resolution): A percentage of incoming calls that can be solved  without the use of a service desk person calling back or without having the  customer call back to finish the case.
• TAT  (Turn Around Time): Time taken to complete a certain job.

These metrics are recorded and monitored to provide feedback to management on the efficiency and usefulness of the call center personnel and to help indicate where training or more resources are needed.

The use of SLAs are not limited to the world of IT or telecommunications--they are also used in real estate, medical and any field that provides a product or service  to a customer. Service oriented people and businesses have a need to measure and hold themselves accountable, and SLAs provide the metrics and ideals for entities to agree upon.