A service-level agreement (SLA) is a contract between two parties that defines the deliverables, obligations, and expectations of each party. SLAs are essential in SaaS buying.
Understanding how to write a solid service-level agreement will help a business establish accountability with service providers and set realistic expectations with stakeholders while also enhancing risk mitigation.
This post covers the details of how to write a service-level agreement and provides an SLA template for businesses to use.
An SLA serves several critical purposes. It is a contractual document that acts as an ongoing reference point for service and reliability expectations, like uptime guarantees, response times for issues, and resolutions for downtime. It covers important details like length of contract, price, renewability, and scope. An SLA also outlines customer responsibilities to ensure the service is used within the standards set by the service provider.
Depending on the business, there are different types of service-level agreements that may come into play.
A customer service-level agreement is needed when there is an agreement with a supplier to provide service to a customer. For example, a SaaS supplier will need to create a customer SLA and SaaS license agreement if it is going to provide SaaS access to a customer.
Some businesses create internal service-level agreements to ensure alignment between in-house stakeholders, like IT, sales, and marketing. It is common for businesses that have customer service-level agreements to also have corresponding internal service-level agreements.
If the business has entered into a customer service-level agreement to provide its SaaS solution to a customer, it may also do an internal service-level agreement with IT for help desk or support services for that customer SLA.
A multilevel service-level agreement is used when there is more than one service level that needs to be addressed. The multilevel SLA may combine the customer SLA and internal SLA, depending on the situation. This type of agreement helps businesses avoid overlapping or incongruent SLAs.
Before moving into the details of a service-level agreement template and how to create one, it’s just as important to be able to quickly identify if an SLA contains all of the elements it needs.
Regardless of the type of SLA, it should begin by addressing the parties to whom the agreement pertains. It may also reference a master service agreement (MSA) if there is one already in place.
Terms can have different meanings to different people, depending on their experience and their industry. Defining terms at the beginning of the agreement is essential to ensuring the parties entering into the agreement are aligned. Once defined, the terms should be used consistently throughout the agreement, avoiding synonyms or industry slang.
Identifying the exact services being supplied under the service-level agreement eliminates any ambiguity about what the supplier is providing for the stated cost or discrepancies between customer expectations, service provided, and quality of service. This may also be called a scope of work.
An SLA should include all costs associated with the services being provided under the agreement. There should never be surprise costs that pertain to the scope of work. Itemized pricing for all aspects of service must be listed, including responsibility for any applicable taxes or other fees. It should also state that any services added that are beyond the scope of work in the SLA will be quoted separately.
Regardless of which party created the SLA, it must include a section of the detailed responsibilities (also called warranties or representations) of each party involved in the agreement. If any party in the agreement does not uphold its responsibilities, it is considered a breach.
For SaaS agreements, this section may include items such as the terms of delivering the services, guaranteed uptime, outage management, support guarantees, performance levels, data security, compliance, use of subcontracts, proprietary rights, rules around assigning the agreement to a third party, and governing law.
An SLA should include an explanation of how the agreement will be managed on an ongoing basis. It will address items like contract renewals and whether they will be automatic or issued a stated number of days before the end of the agreement period. The agreement should detail terms surrounding cancellation.
For example, perhaps the SLA must be canceled 60 days before the end of the term. A termination clause addresses what happens if either party breaches the contract. The SLA will also address how all parties should handle price increases.
An SLA includes a section, often called indemnification or hold harmless, that describes an agreement of limitation of liability and indemnification for either party. For example, if a supplier’s SaaS solution hosts confidential customer data and that data is breached resulting in a third-party lawsuit, this section addresses liability, time limits, maximum compensation, and so on.
If the SLA references any other agreements or addendums, the SLA should include them as exhibits at the end of the agreement. This could include a master services agreement, additional related SLAs, or changes that have been made to the SLA. For example, a customer might want to include their own SaaS rider that includes some internal SaaS governance as an addendum to the SLA.
The following easy-to-use SLA agreement template is intended to assist businesses to create their own. Here are the elements of an SLA and what should be included in each.
Outsourcing SaaS management to Vendr, a third-party SaaS vendor management supplier, is one of the most effective ways to reduce the knowledge needed and time spent on service-level agreements. While businesses are still included and invested in SLAs, Vendr’s platform uses extensive SaaS industry knowledge to navigate and manage them so procurement and senior leadership time can be spent on more strategic initiatives.
