Service level agreements (SLA) are really a misnomer. They are not really agreements but are actually schedules used to clarify the standard at which the supplier performs the services under an agreement. SLAs are often subject to a main agreement (such as a managed services agreement or master services agreement) between supplier and a recipient of services and will usually be annexed to that main agreement in the form of a schedule.
SLAs have an important role to play in services agreements, and can be applied to a broad spectrum of scenarios where supplying and receiving services, such as providing services regarding the use of supplier software, any service where a recipient may need to know the availability or the response time of a supplier, or essentially any service which can be monitored or measured in any way.
A well drafted SLA sets out a number a performance targets which suppliers may be required to meet. The SLA may also include information about when the supplier needs to be available and how quickly any issues with the services are to be resolved. The contents of the SLA depends upon the specific service being provided and can be tailored on a case-by-case basis. The more specific the SLA, the more clarity there is for the recipient of the services.
Role of a SLA
In addition to providing clarity on the services to be provided, SLAs can also serve as an important contractual tool in obliging (or not obliging) the supplier to match the levels set out in the SLA.
Where the SLA is appended to a master services agreement or a managed services agreement, the terms set out in those agreements can drastically change the role and weight of the SLA.
For example, the main agreement may include provisions allowing the recipient of the services to reduce the amount payable to the supplier, refuse payment altogether or even terminate the agreement if there is a continuous or material deviation from the standards set out in the SLA.
Conversely, the main agreement could include provisions stating that the SLA is only indicative of the services you would expect and does not bind the supplier in any way.
Suppliers can also use SLAs to their advantage as it can be used to manage customer expectations in respect of the services supplied and set a clear period for which the supplier cannot be held responsible for outage or any performance issues.
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