What Is An SLA & Why Is It Important To Understand What’s In It?

January 13, 2023 | By: Scott Lard

When looking for a managed services provider (MSP), organizations will find that most IT service management companies offer their clients services based on what’s known as a service level agreement (SLA). This is a very common component of outsourcing tech services, so it’s imperative that all business owners understand what it is, what it includes, and how to leverage the SLA to best benefit the business.

Below, we’ll discuss the details of service level agreements, including common questions and ways your organization can help create an ideal agreement.

What is service level agreement

Service level agreements (SLA) are contractual agreements that help define a level of service, performance standards, and a baseline of what to expect from your relationship with your provider. In regards to IT assistance, such as with a managed services provider, an SLA will define things such as expected response times, guarantees regarding IT performance, and additional metrics to measure service. Within an SLA, providers will also outline what will happen in the event they don’t meet the agreed upon level of service. For example, some providers will offer businesses service credits in the event performance goals haven’t been met. 

It’s important to have documentation of projected levels of service and performance so both parties know what to expect and what action to take in the event outcomes are different than expected.

Components of Service Level Agreements

Understanding an SLA as a part of an IT provider contract starts with understanding its components. So, how are service-level agreements typically structured? 

There are many aspects within an SLA, including which services are to be provided, detailed metrics regarding the services, costs of the services, and more. The main components of an SLA include service and management elements.


Service areas of an SLA will outline exactly what services will be provided and what services, if any, will not. Service sections of the SLA include hours of operation, costs of services, escalation procedures, and any other parameters that are important for involved parties to know.


Management areas of SLAs include how the MSP will measure progress and performance. This can include an outline of objectives that the MSP will aim to achieve, details on how they will report any changes in business processes, and what protection is offered to the client by the MSP in the event business objectives aren’t met.

Key Elements of an SLA

What are the Key Elements for Service level agreement

The following are examples of more specific elements that are often included in the SLA:

  • Overview – The basic information regarding the responsibilities of the provider, including what partners are involved in the agreement (the business, the MSP, etc.), as well as the start date of the agreement and an outline of what support and services will be offered.
  • Services Description – What exact services the SLA will be providing and details surrounding those services? For example, an SLA with a full-service MSP would include details on every aspect of IT management the MSP will provide, what hours they will provide service, and what resources (hardware, software, man-power, etc.) will be used to provide services.
  • Exclusions – The services or performance levels that are NOT included within the contract.
  • Performance Expectations – Metrics that define how well the technology services are expected to perform (uptime, downtime, number of issues, etc.) and what reporting methods will be used to provide results to the customer.
  • IT Security – How the MSP will protect your business data and systems from cybersecurity and/or physical security issues.
  • Backup and Disaster Recovery – In the event of a breach, a BDR plan outlines the processes that the MSP will enact to help reestablish service and get business systems up and running.
  • Compensation – In the event the MSP doesn’t meet customer expectations or services are out of compliance with the agreed upon service/performance metrics, compensation or service credit penalties will be outlined in the SLA.
  • Service Performance Analytics – How the MSP will document, measure, track, and report on the business’s IT performance. 

Remember that every SLA will be slightly different, depending on the parties and circumstances involved, but having the basics in mind will help avoid confusion when looking through an SLA from potential IT service providers.

Benefits of a Service-Level Agreement

Providing an SLA is one of the best practices in managed services, in part because of the many benefits it provides for each side of the partnership. For the provider, it manages client expectations. For businesses, it offers specific measurements by which to gauge the value of their investment in having an IT partner.

What Are the Different Types of Service Level Agreements?

There are a few key types of SLAs, including:

  • Customer – Customer service level agreements are between a service provider and their customers to help negotiate things such as expectations, payment rates, standards for service, and more.
  • Internal – Interal service level agreements are contracts between internal departments, teams, or organizations within a company to help establish and enforce deliverables. 
  • Multilevel – Multilevel service agreements are SLAs that are divided into tiers specific to a selection of customers. Similar to customer service level agreements, these SLAs help manage pricing and expectations. However, it is done with different levels of service depending on the type of customer.

For companies looking for a managed services provider, expect to deal with customer or multilevel SLAs.

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