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IT Outsourcing: What is a Service-Level Agreement (SLA)?

If you’re about to start IT outsourcing, there are a few procedures that can make this process easier and safer, and that you should definitely be familiar with. One of them is signing an SLA (Service-Level Agreement). What is SLA, how to prepare the document and why is it important for your business?

Service Level Agreement in outsourcing contracts

What is SLA? A Service Level Agreement is a contract signed between the customer and an IT outsourcing service provider. Its main purpose is to define the scope of performed services, their standards, responsibilities, and conditions. With a properly prepared SLA that clearly sums up the client’s goals and expectations, the provider can deliver their services more accurately and efficiently. This type of contract is widely used in a number of IT-related fields, including not only IT outsourcing, but also cloud computing or IT service providers.

Basically, the role of SLA is to secure the delivery of the services and clearly define the conditions and rules of the cooperation between two businesses. This makes signing the agreement a critical step in IT outsourcing, the one that guarantees the protection of both parties and ensures the satisfying quality of the cooperation. If a SLA is built wisely and includes all the necessary clauses, it will significantly help to understand responsibilities within the mutual project, and define priorities and evaluation methods.  

How to prepare SLA in IT outsourcing?

How to prepare SLA? According to the importance of a Service Level Agreement in outsourcing services, signing the document should be heavily considered. Except for the basic elements, such as an agreement overview, the scope of the expected work and a description of the services, it should include a few more clauses such as:

  • Metrics

Choosing the right metrics for measuring the results of the provided services is the critical part of every SLA contract. Basically, this is how the quality of the performed services will be monitored and evaluated. Then, make sure that the metrics stated in the SLA are important to you and will help you to assess the performance in your key areas. To provide you with a few examples of specific metrics, they can be: service availability (the amount of time when the service is available, expressed in percentage or hours), defect rates (percentage of errors in deliverables), security standards, business results (e.g. KPI), etc.

  • Remedies for breach

It may happen that the statements of the SLA will get abused. Parties should definitely be prepared for such events, and writing down the SLA is a great moment to do it. The contract should precisely define the penalties for the breach, and also some exceptions in which they will not be applied (such as force majeure or delays occurred on the client’s side). The consequences of breach must be defined and secured especially in the case of business-critical services. 

  • Additional costs

In the long-term cooperation, which IT outsourcing obviously is, it may occur that the cost of the requested services will exceed the budget stated in the agreement. Thus, it is important to define the responsibilities for the extra costs and agree on who’s gonna cover them. In case of passing the specific cost on to a client, the service provider should include such information in the agreement. 

  • Risk management and disaster recovery

When working with an IT outsourcing partner, it is critical to clearly define responsibilities. In case of a disaster, the company should have already developed a plan for recovery, and its framework should be included in the SLA. Thanks to this, everyone will be clear about their responsibilities and able to act accordingly to the agreement in order to efficiently remove the malfunction.

  • Bonus

But what happens if the service provider’s performance exceeds the expectations? Well, an SLA can be prepared also for this circumstance. The agreement may include the information about the bonus that is gonna be paid to a service provider in case they reach a required goal or indicator. It is recommended especially when the service provider has the power to add a significant value to the client’s business and produce an extra profit to share. 

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The Summary

Now you already know how to prepare an SLA contract that is used by almost every recruitment agency. Service Level Agreement template should always be prepared carefully, to make sure that both the service provider and the client are secure and satisfied with the agreed conditions. 

Are you in charge of the recruitment process, outsourcing Service Level Agreements or finding an IT outsourcing partner? Feel free to contact us. With a vast experience in IT recruitment, we will be happy to provide you with more tips on how to find IT specialists and how to prepare all the necessary documents.