A various Level Agreement (frequently abbreviated as SLA) is a part of a service

contract where the level of service is formally defined. In practice, the term SLA is
sometimes used to refer to the contracted delivery time (of the service) or performance.
As an example, internet service providers will commonly include service level
agreements within the terms of their contracts with customers to define the level(s) of
service being sold in plain language terms (typically the (SLA) will in this case have a
technical definition in terms of MTBF, MTTR, various data rates, etc.)

A service level agreement (SLA) is a negotiated agreement between two parties where
one is the customer and the other is the service provider. This can be a legally binding
formal or informal "contract" (see internal department relationships). Contracts between
the service provider and other third parties are often (incorrectly) called SLAs — as the
level of service has been set by the (principal) customer, there can be no "agreement"
between third parties (these agreements are simply a "contract"). Operating Level
Agreements or OLA(s), however, may be used by internal groups to support SLA(s).

The SLA records a common understanding about services, priorities, responsibilities,

guarantees, and warranties. Each area of service scope should have the "level of service"
defined. The SLA may specify the levels of availability, serviceability, performance,
operation, or other attributes of the service, such as billing. The "level of service" can
also be specified as "target" and "minimum," which allows customers to be informed
what to expect (the minimum), whilst providing a measurable (average) target value that
shows the level of organization performance. In some contracts, penalties may be agreed
upon in the case of non-compliance of the SLA (but see "internal" customers below). It is
important to note that the "agreement" relates to the services the customer receives, and
not how the service provider delivers that service.

SLAs have been used since late 1980s by fixed line telecom operators as part of their
contracts with their corporate customers. This practice has spread such that now it is
common for a customer to engage a service provider by including a service-level
agreement in a wide range of service contracts in practically all industries and markets.
Internal departments (such as IT, HR, and Real Estate) in larger organization have
adopted the idea of using service-level agreements with their "internal" customers —
users in other departments within the same organization. One benefit of this can be to
enable the quality of service to be benchmarked with that agreed to across multiple
locations or between different business units. This internal benchmarking can also be
used to market test and provide a value comparison between an in-house department and
an external service provider.

Service-level agreements are, by their nature, "output" based — the result of the service
as received by the customer is the subject of the "agreement." The (expert) service
provider can demonstrate their value by organizing themselves with ingenuity, capability,
and knowledge to deliver the service required, perhaps in an innovative way.
Organizations can also specify the way the service is to be delivered, through a
specification (a service-level specification) and using subordinate "objectives" other than
those related to the level of service. This type of agreement is known as an "input" SLA.
This latter type of requirement is becoming obsolete as organizations become more
demanding and shift the delivery methodology risk on to the service provider..

SLAs are also defined at different levels such as:

• Customer Based SLA: An Agreement with an individual customer group,

covering all the services they use. e.g. An SLA between a supplier (IT Service
Provider) and Finance Dept. of a large organization for the services such as
finance system, payroll system, billing system, procurement/ purchase system etc.

• Service Based SLA: An agreement for all the customer using the services being
delivered by the service provider e.g.:
o (Non IT Example) A car service station offers a routine service to all the
customers and offers certain maintenance as a part of offer with the
universal charging.
o (IT Example) an email system for the entire organization. There are
chances of difficulties arising in this type of SLA as level of the services
being offered may vary for different customers (e.g. Head office staff may
use highspeed LAN connections while local offices may have to use a
lower speed leased line)

• Multilevel SLA: The SLA is split into the different levels, each addressing
different set of customers for the same services, in the same SLA.

• Corporate Level SLA: Covering all the generic service level management (Often
abbreviated as SLM) issues appropriate to every customer throughout the
organization. These issues are likely to be less volatile and so updates (SLA
reviews) are less frequently required.

• Customer Level SLA: covering all SLM issues relevant to the particular customer
group, regardless of the services being used.

• Service Level SLA: covering all SLM issue relevant to the specific services, in
relation to this specific Customer group.

Service-level agreements can contain numerous service performance metrics with

corresponding service level objectives. A common case in IT Service Management is a
call center or service desk. Metrics commonly agreed to in these cases include:

• ABA (Abandonment Rate): Percentage of calls abandoned while waiting to be

answered.
• ASA (Average Speed to Answer): Average time (usually in seconds) it takes for a
call to be answered by the service desk.
• TSF (Time Service Factor): Percentage of calls answered within a definite
timeframe, e.g., 80% in 20 seconds.
 • FCR (First Call Resolution): Percentage of incoming calls that can be resolved
without the use of a callback or without having the caller call back the helpdesk to
finish resolving the case.
• TAT (Turn Around Time): Time taken to complete a certain task.

Uptime Agreements are another very common metric, often used for data services such
as shared hosting, virtual private servers and dedicated servers. Common agreements
include percentage of network uptime, power uptime, amount of scheduled maintenance
windows, etc.

Many SLAs track to the ITIL specifications when applied to IT services.

SLAs commonly include segments to address: a definition of services, performance

measurement, problem management, customer duties, warranties, disaster recovery,
termination of agreement.[1]

From a business perspective, you may need to look at Service Level Management (SLM)
if you need to differentiate the service (e.g., to Gold, Silver, or Bronze) and have a
differentiated price for each level of service.[2] Key points are to write the SLA in the
language that the user understands and to have regular service reviews.

Cloud computing, (also Grid computing and service-oriented architecture), uses the
concept of service level agreements to control the use and receipt of (computing)
resources from and by third parties.

Any SLA management strategy considers two well-differentiated phases: the negotiation
of the contract and the monitoring of its fulfilment in real-time. Thus, SLA Management
encompasses the SLA contract definition (basic schema with the QoS (quality of service)
parameters), SLA negotiation, SLA monitoring, and SLA enforcement, according to
defined policies.

The main point is to build a new layer upon the grid, cloud, or SOA middleware able to
create a negotiation mechanism between providers and consumers of services.[3]. A
European Union funded Framework 7 research project, SLA@SOI[4], is researching
aspects of multi-level, multi-provider SLAs within service-oriented infrastructure and
cloud computing.

The underlying benefit of cloud computing is shared resources, which is supported by the
underlying nature of a shared infrastructure environment. Thus, service level agreements
span across the cloud and are offered by service providers as a service based agreement
rather than a customer based agreement. Measuring, monitoring and reporting on cloud
performance is based upon an end user experience or the end users ability to consume
resources. The downside of cloud computing, relative to SLAs, is the difficultly in
determining root cause for service interruptions due to the complex nature of the
environment.