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In the age of the so-called gig economy and rising outsourcing tendencies, comprehensive and detailed contracts are a necessity. When it comes to the service level agreement for software outsourcing, some might get confused: how is it different from a simple contract?

This article will give an exhaustive outlook of what is an SLA, concentrating on its benefits and components.

This article will cover topics on how to write service level agreements and choose the appropriate type of agreement for your partnership. First and foremost, we will present you with a pristine service level agreement template. It includes everything from big metrics to small trivial stuff. This ultimate template can serve you as a model and checklist for writing your own SLA.

We at SPD Group have been delivering quality-driven outsourcing solutions for more than 15 years. We know how important SLA is for making a great idea happen. Promoting values of teamwork and knowledge, we want our partners to better understand each component of the outsourcing services. Here is our detailed guide to a service level agreement for IT services.

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What is a Service-Level Agreement in Software Development?

SLA seems like a complex abbreviation, and an explanation of what SLA stands for — Service-Level Agreement — does not give much clarity. So how is SLA different from a contract?

The common misconception is that SLA is just a list of all services to be supplied. Functional SLA consists of diligently thought through and discussed parameters, which give clarity both to vendor and client. A perfect SLA captures roles and responsibilities, timelines and pricing, scenarios in case of failures or delays, guidelines, and protocols for adjustments.

This Service-level Agreement is an instrument to measure and determine the quality of the services. SLA helps establish a transparent and solid relationship between a vendor and a client: no fallen promises and unfulfilled expectations. SLA allows you to configure hardware and software to maximize the ability to meet the determined criteria.

How to choose metrics for the SLA? Here are the simple rules which will help you to deliver a document beneficial for both sides.

  • While choosing metrics, take a step back and try to self-reflect on what this means from the other side. Always keep in mind this question: how does this concrete metric contribute to the final result? Does it really serve the purpose?
  • Even if you chose the most experienced contractor, ensure that the requirements and metrics included in the SLA correspond with the team’s capabilities and resources.
  • Avoid vague metrics: in case of any complications, it will only make the situation worse. The main goal of SLA is to be on the same page, so all the metrics have to be easily collected.

Why Do You Need an SLA?

How does SLA work? The project is developing, and SaaS is humming along. Suddenly, an interruption occurs: this is when SLA comes into effect. The document has clear answers for all the questions: it defines when, by whom and how to fix the interruption. A service level agreement for IT services is a paramount element of any outsourcing contract. Want to know why? Here is our critical explanation.

Pros of SLA

Before moving on to benefits, we want to clarify that not everyone believes in SLA’s potential for establishing a professional, trustworthy relationship between two parties. So, to SLA or not to SLA? We will look at different angles of this issue.

Let’s begin with the approach in favor of service level agreement for software development.
How can both parties be satisfied if everyone has different ideas about the result and mismatched expectations about each other’s responsibilities? Let us briefly outline the benefits of service level agreements:

  • Official agreement and documentation, which provides security to both parties
  • Easily managed communication: in case of any misunderstanding, both parties can refer to SLA, an ultimate referee, for any possible issue
  • Greater customer service: response and resolution time are defined in the document
  • Defined goals that nurture higher productivity
  • Guarantees against risks and malfunctions

Overall, for the client, SLA serves as a guarantee for the purchased services. For the vendor, SLA is a clear guideline that specifies goals and responsibilities.

Cons of SLA

In essence, consensus and satisfaction can rarely be achieved without an SLA, yet it is important to outline the criticism. There are experienced and recognized professionals who believe that SLA is problematic and outdated. According to some developers, SLA enforces certain restraints on the developers, eliminating creativity and innovation.

The approach, which revolves around providing a minimum level of service at minimum cost, can turn software development services from a partner that adds value to the common goal into a simple commodity. In other words, separation of the worker from the means of production at its finest.

In his recent Forbes column, Boris Kontsevoi views service-level agreement in software development through the lens of productivity and performance. CEO of Intetics Inc. wonders: while SLA can cover measurements of concrete services, scale, time, goals, and penalties, where is a place for productivity here? He suggests that the potential to measure (and boost) productivity stumbles upon the lack of universal standards for custom software development.

What Type of SLA Should You Use?

On that critical note, let us remind you that it is always important to adjust SLA to the concrete situation and business needs. Even in some cases, when SLA is not usually adjusted (for instance, in the cooperation with cloud service providers), SLA must align with business goals and objectives. Here are the kinds of metrics one might need to include and supervise.

System Availability

High availability is often a primary goal for software developers. While high availability of generally desired metrics, for some systems, for instance, hospitals, high availability is particularly crucial. It is important to prioritize and establish what type of availability is needed for your business. This metric can be defined by time slot: at some hours, for instance, standard business hours, more availability is needed.

System Response

While everyone strives for the shortest response time possible, the question “what is a good/bad response time?” confuses. How do you measure system response: by average, by median? The parties should agree upon all these questions in an SLA.

System response can also refer to the SLA that oversees response time and resolution time in case of any issues. How quickly the provider should respond to the report, and how much time the team has to resolve the issue.

User Satisfaction

Customer is the king, right? What is the use of flawless software if it does not speak to the user? Customer satisfaction can be measured with follow-up surveys. Consequently, desired numbers should be agreed upon in the SLA.

Business Metrics

Keep in mind that this type of SLA is quite general and needs to be specified. Nevertheless, we wanted to highlight that a concrete business goal should be included in SLA. One way to measure it is, of course, KPI.

What Should an SLA Include?

There are numerous ways one can group SLA content. Yet, there is no universal standard, so one has to adjust each SLA template for IT services to the concrete tasks. We defined three main categories one should include in the service level agreement for outsourcing.

Guaranteed Uptime

One of the most critical and fundamental metrics of SLA is an uptime guarantee. This metric defines the amount of time when service is available — uptime. Usually, guaranteed uptime is associated with 99%. 99% of uptime guarantee means that your service has around 15 minutes of downtime each day, which turns into around 6 hours of downtime each month.

Naturally, in your world of limitless connectivity, even 15 minutes of downtime is not acceptable anymore. The new required standard is 99.99%. It results in approximately 1 minute of downtime per day and, in sum, is less than an hour of downtime per year.

Performance Metrics and KPIs

Before moving on to sorting out the intricacies of service level agreement performance metrics and KPIs, it is vital to mark the difference between KPI and SLA. Key Performance Indicators define a company’s strategic goals. As we already stated, SLA covers much more than goals and business outcomes. One can say that KPI is a part of SLA that focuses on the specific performance levels, while SLA covers all the intricacies of the cooperation between vendor and client.

There is no defined amount of KPI for the SLA: it varies per service. Here are some tips for defining KPI:

  • Remember, KPI is a strategic knot between provider and service performance
  • One should be aware that some KPI would lose their relevance during the production
  • SLA should cover the limitations of KPI

Response Times and Support Availability Requirements

One may think the highest availability, the better. The highest possible availability seems to be an obvious goal for your service. As we already mentioned, 99% of uptime is an outdated requirement. Today, every service provider promises 99.999% availability (which equates to around 30 secs of downtime per month). However, only 30 seconds less of downtime can cost you… well, a lot.

In his 2019 article, Diogo Guerra urges clients to ask themselves: how much availability do we actually need? One must remember that even the lowest metrics of downtime exclude regular maintenance. One should critically evaluate their business requirements and be realistic about adequate availability commitments.

Service Management

This part defines communication and facilitation of support: when support is available, how much time it would take to resolve issues, and other technicalities.

Service Agreement

It is the most exhaustive part of the SLA, which covers features, roles and responsibilities, general scope, a timeline for each level of service, and general objectives.

Risks, Exclusions, and Violations

Carefully choosing a provider, one always hopes for the best results. However, communicating what can go wrong and how to deal with that protects both vendor and client.

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Service-level Agreement Template

It is all neat and clean, but how to write an SLA in software development. As promised, here is a perfect service level agreement example one can adjust to their needs.

One might think that half of the job is done once you have a template on your hands. A universal, applicable to all contracts SLA template would be a great solution. Yet, in practice, SLA’s that are not adjusted to the specific business needs bring a lot of trouble. The project manager can indeed save some time because there is no need to create a substantive SLA document from scratch. Yet, barely adjusted SLA will overlook a lot of major issues. We have already elaborated on the importance of details and nuances in SLA.

Thus, one can only imagine the complications, misunderstanding, and even financial loss that badly written SLA can cause. So, before moving on to analyzing a perfect template, we want to highlight once more the importance of adjusting your SLA to the specific business needs and goals.

Now, when we are finally on the same page about the vitality of calibrations of your service-level agreement to the specific project’s needs, let’s take a close look at the presented SLA’s.

SLA Templates Options

We want to present two extensive, all-covering SLAs. Both of the examples cover all the components needed for a flawless SLA.

We tried to select two slightly different templates: each example has different strengths.

For instance, this template gives a perfect example of a clear and appealing document design.

Learn what SLA looks like

The SLA template for Columbia University Infrastructure Services for VM Hosting gives a more detailed overview of SLA purpose and parameters.

SLA template from Columbia University

To better understand SLA components, we will analyze the introduced templates in more detail.

Service and Targets

One of the first sections should cover service goals and targets. This section clearly describes provided services and specifies service availability. Moreover, it is vital to cover exceptions when service would be unavailable: for instance, during maintenance and in case of severe performance degradation.

This is an example of goals and targets of SLA

Change Management

It is important to communicate changes to services and establish a clear Change Management policy. While some sections like client’s responsibilities or provider’s responsibilities and exclusion cover change management technicalities, it is useful to have a clear separate section about possible adjustments.

Monitoring

This section should specify the technicalities of service reporting, procedural responsibilities, and periodic performance reviews. After comparing the two presented templates, you can notice that maintenance technicalities can be framed as part of the Service Management section or a separate chapter.

Appendix

Appendix and additional files at the end of your document can include more detailed, quantitative measurements of goals and requirements. For instance, the Columbia University SLA contains concrete metrics for request fulfillment times, technical policies, pricing models, and availability percentage. For example, appendix D, which gives a concrete overview of priority definitions, defines four levels of priority and the appropriate resolution targets as well as response times. You can take a look at the example below.

Appendix examples for SLA

SLA: Final thoughts

We hope that this article equipped you with tools to compose an SLA agreement that will ensure transparency and support for both parties. While looking for the right vendor to implement your idea, do you prioritize teamwork, knowledge, and innovation? If your answer is yes, it seems like SPD Group is the right fit.

SPD Group believes in long-lasting partnerships. We specialize in building not only software but also building relationships. The agile approach helps us to ensure transparent delivery while reducing inefficiencies. Let’s work together for a brighter future.

The key metrics you need to be aware of include System Availability, System Response, User Satisfaction, as well as specific business goals with KPIs.

Among the main section are Guaranteed Uptime, Performance Metrics and KPIs, Response Times and Support Availability Requirements, Service Management, Service Agreement, Risks, Exclusions, and Violations.

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