A service level agreement (or SLA) is a useful tool to manage the relationship between a service provider and their client. It is often for IT related services that are being provided by IT vendor to a customer. There is quite a bit of confusion in South Africa about service level agreements. Different people seem to have different understandings of what they are and why they should exist. There are many different kinds of service level agreements, which confuses the issue. We thought we would set out our understanding of a SLA and provide some guidance on how to get them right. You can also attend a workshop on service level agreements.
What should be in a Service Level Agreement?
A service level agreement describes the services (not goods) that one entity will provide to another. If goods are being provided, a SLA is not the right agreement. It is a type of contract and in the IT context it is an IT contract. We’ll write more about the difference between an agreement and a contract another time. In order to create a SLA that works, you must define:
- the service to which the SLA applies;
- a set of criteria or objectives to determine service levels that can be used to measure whether your objectives have been met;
- who the SLA applies to (you or your customer);
- the responsibilities of each person involved;
- how the service levels will be measured (if it cannot be measured there is no point having a service level) and
- actions to be carried out if the service levels are not met (for example service level credits).
The service levels are at the heart of the relationship, as they set out the (agreed) criteria by which you can objectivity demonstrate that the quality of service you want has been achieved. There is no such thing as a generic “service level” agreement. Why? The content is entirely dependent on what the actual service is. It can be any service that you want to measure (ranging from looking after the pot plants in your office to hosting your IT infrastructure). It is necessary to identify and quantify the key activities that will be necessary. Perfect performance is not a realistic criterion.
Negotiation of service levels involves a compromise between the clients ideal list of requirements and the need to prioritise these in terms of what is realistically achievable. Performance measurement can entail considerable negotiation. A balance needs to be struck so that the desired levels of performance can be secured without imposing restrictions on the service provider that are so tight that they inhibit the development of a creative and effective working relationship.
A balance needs to be struck
What happens if service levels are not met?
Once the service levels have been ascertained, it is necessary to deal with the impact of failure to meet them and the level of compensation must be defined. Negotiations often focus on the compensation the service provider must pay for service failure (whether it be in the form of penalties, service credits or damages).
Are they enforceable?
Yes, they are theoretically enforceable in our courts, but in practice any legal action in our courts to force the service provider to perform is a lengthy and costly process. Or even to force the customer to pay. The better a Service Level Agreement is, the greater the chance that it will be enforceable. A horrible SLA is probably not enforceable. But a SLA is a tool to build a good relationship, and should not be seen as a weapon to use against the other party.
A SLA is a tool to build a good relationship
What laws apply?
A SLA is a type of contract (even though it is called an agreement) and therefore the law of contract is the most applicable law. The law of contract is mainly based on the common law (like case law). There are lots of recent cases dealing with things like:
- concluding contracts by email,
- offer and acceptance,
- the interpretation of contracts.
There are very few Acts of Parliament that are applicable. However, if the person receiving the goods or services as a consumer, then the Consumer Protection Act (CPA) applies. The CPA requires the SLA to be in plain and understandable language, and it must not contain prohibited clauses.
What makes an SLA good?
A good SLA accurately records the common understanding between the service provider and the customer. It should be written for the parties and not for a judge in the event of a dispute. The purpose of a service level agreement is not to be able to enforce your rights in court but rather to try and ensure a positive amicable relationship in which the customer receives services at the levels at which it requires. And in addition the service provider knows what its responsibilities are.
It should be a living document. It should not be filed away once signed, never to be referred to again. It should be constantly referred to and updated when the services change.
What should a CIO be on the lookout for?
Chief Information Officers (CIOs) need to be aware of (and carefully consider) various things when signing a service level agreement, such as the warranties, indemnities, liability, remedies, and penalties for a breach. The duties and the responsibilities of each party to the agreement should also be set out. They need to make sure that a description of the service is also included, as well as the standard at which services are to be performed.
How we draft an SLA
A combination of legal and technical skills is necessary to draw up the necessary requirements. We are legal experts and we understand technology and the ICT sector, which places us in a great position to draft a service level agreement for IT related services. Typically, we draft a service level agreement to comprise of two components, but it can include all in one document:
- Customer Relationship Terms (CRT) which deal with the generic legal issues between the parties. Things like, the law that governs their relationship, warranties, liability issues, what happens if a party is in breach and how disputes will be resolved, and
- Specific support and maintenance terms, including the service levels, in a Support and Maintenance Services Order (SMSO).
This is based on our modular approach to drafting IT contracts that we follow. Some people call the CRT+Support and Maintenance terms, a “Service agreement” or “SLA” (service level agreement). Typically the SMO defines a set of “service levels” to be respected, with a minimal acceptable threshold and an unacceptable threshold. These service levels must be measurable and reportable.
If you are interested, please complete the form on the right or enquire now. We will contact you to find out more about your requirements.