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What are the Components of a Service Level Agreement?

Each service commitment (SLA) has these attributes:

  • Service - the service or action the the vendor provides. For instance, your Internet Provider gives you internet access.
  • Measurement - this is a metric that quantifies the service commitment. Again, using our Internet Provider example, the measurement could be 99.999% availability (also known as “5 nines of uptime”).
  • Interval - the measurement (metric) must captured at defined intervals. For example:
    • “….Every time the helpdesk is called..”,
    • “… every month”,
    • “average of all tickets every month”,
    • etc.
  • What are SLA based services?
  • Obligations - Some SLAs have obligations that the Client AND the Vendor must fulfill in order for the SLA to be enforceable. Also, it’s a common obligation for the Client to declare an “SLA Violation” in order to exercise their right to receive penalty fees from the Vendor.
  • Penalty - This is the penalty for failure to comply with the SLA component’s obligations (“SLA Violation”). In subscription-based agreements, the penalty a vendor incurs will usually be to give a credit back for a percentage of the monthly subscription. In software development outsourcing – an SLA penalty is often the loss of a “bonus payment” (or percentage) held in reserve by the Client for a successfully completed project with all SLA’s met.

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