sla – do i need it in my contract?
A Service Level Agreement (SLA) is a critical component of IT and technology contracts, ensuring that service expectations of the clients are clearly defined and the supplier’s technical capabilities meet the requirements. A well-drafted SLA minimizes financial risks related to service interruptions and prevents contractual disputes. having an sla in place is essential for strategic IT projects where excessive service interruptions cannot be afforded. Below are the best practices for drafting an effective SLA in IT contracts.
defining clear objectives and scope
When drafting an SLA, it is advised to start by defining the objectives of the agreement. it is necessary to Clearly outline the scope of services covered, including:
- The description of the services provided (if applicable, in line with the wording of the main agreement that the sla is attached to)
- service limitations
- list of 'out of scope’ activities
establishing performance metrics
One of the most critical aspects of an SLA is setting Key Performance Indicators (KPIs), which clearly set out the expected results and are based on quantifiable metrics, such as:
- uptime / downtime percentage (percentage of time the service must be available)
- response time (maximum time to confirm the acknowledgement of the request)
- resolution time (maximum time to fix the reported issue)
- security metrics (compliance with security standards and response time regarding the security incidents)
- user satisfaction (measured via surveys)
- escalation metrics (time of resolution of previously unresolved issues), etc.
the defined performance indicators must be aligned with the desired business goals. the targets should be achievable and realistic, preferably based on industry standards. the metrics must be measured within the predefined review periods.
defining contractual remedies
To ensure compliance, it is advisable to include contractual penalties or service credits as a result of service failures.
The most common mechanism are service credits, where the provider compensates the client with free or discounted service if performance metrics are not met.
financial contractual penaltes may be imposed on the provider for failing to meet SLA obligations. in addition, the contract should allow for Termination of the services contract if repeated / major SLA violations occur.
sla may impose an obligation of increased support at no cost to the client for a defined period of time, in case of non-compliance with the agreed standards. the contract may contain stipulations regarding the the Extended Service Periods / scope provided without charge, in order to make up for downtime or failures to comply with sla.
conclusion
as IT industry standards constantly evolve, an SLA should be reviewed periodically to reflect changes in the technology and business needs.
a properly drafted and reviewed SLA in IT contracts is crucial for ensuring service quality and maintaining client trust. if you need legal support in drafting / reviewing your sla and aligning to your business needs, do not hesitate to contact us.