A Service Level Agreement (SLA) is the part of a contract which defines exactly what services a service provider will provide and the required level or standard for those services.
An effective SLA should have the following components:
- State the business objectives to be achieved in the provision of the services
- Describe in detail the service deliverables
- Define the performance standards the customer expects in the provision of the services by the service provider
- Provide an ongoing reporting mechanism for measuring the expected performance standards
- Provide a remedial mechanism and compensation regime where performance standards are not achieved
- Provide a mechanism for review and change to the service levels over the course of the contract
- Provide the customer the right to terminate the contract where performance standards fall consistently below an acceptable level.