SaaS Service Level Agreement Fundamentals

If you’ve ever provisioned a SaaS license, you might find it’s a lot like leasing a car. You generally can’t just pick a car and drive off the lot. You need to chat with a salesperson and develop suitable terms that work for you and the leaser. And even if you could pick a car and drive off the lot, would you really want to without hashing out some details first?
Before you sign on the dotted line, you’ll want to ask some questions like, “How much money down does the dealership require? How much are the monthly payments? Will they provide maintenance? How many miles am I allowed to drive per year and throughout the lease? What happens if I, or the leaser, don’t fulfill our respective responsibilities of the lease?”
As you define how you and the dealership will operate on and agree to the terms of the lease, you can rest assured that if a service failure occurs, you have a single document—the lease agreement—to reference for an appropriate course of action. This example analogizes how you might acquire a SaaS license and why you need a service level agreement (SLA).
So how does an SLA provide you with a single source of agreed-to terms? And what exactly is a service level agreement?
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An SLA is a vital portion of an IT contract that defines, in a single document, what level of service you, the end-user, can expect from a vendor. It dictates how the IT service is measured and what remedies or penalties would ensue should the vendor, or you as the client, fall short of meeting expectations.
Usually, companies and external suppliers establish SLAs, but two departments within a company can negotiate an SLA as well.
SLAs legally protect you and your vendors from deliberate or inadvertent misrepresentation. By laying out the details, an SLA ensures that you and your vendor share the same understanding and expectations should service level disruptions occur.
An SLA can also protect you with an indemnification clause. An indemnification clause can state that the IT service provider will compensate your organization for any warranty breaches like outages and performance issues. It also states that your provider will pay you for any third-party litigation costs due to those breaches.
You’d want to require an SLA to guarantee service satisfaction for your organization on cloud services, internet services, or any cloud-computing SaaS solution you’re outsourcing. Likewise, your vendor would want an SLA to guarantee your satisfaction.
Another reason you’d want an SLA is so you and your vendor can define your communication boundaries. You’ll want to get the best and most customer service value (responsiveness), and your vendor will want to maintain performance standards while protecting the amount of time and resources they’re committed to providing.
There are three primary types of SLAs: customer, internal and multilevel.
Most of your vendors will likely offer standard template SLAs—sometimes many for varying service levels at various prices—and these can provide a starting point for negotiation.
The SLA will contain two main elements: service and management.
Service elements list the levels of service specifics included and, sometimes for clarity, what’s excluded. They describe service availability conditions and define standards, such as time windows for each service level like prime time and non-prime time variances, also known as uptimes, downtimes, and response times. They also list each party’s responsibilities, how issues would undergo escalation, and identify cost and service tradeoffs.
Management elements should define the SLA’s measurement standards and methods, reporting processes, contents and frequency, a dispute resolution process, and a process to update the agreement as needed. And although it should be covered in the contract, they should also include an indemnification clause, protecting you from third-party litigation due to the vendor’s agreement breaches.
Standard SLAs also often include these six components:
Here are some tips and best practices when negotiating SLA terms with a vendor:
*Usually, service providers identify the reporting processes and methodologies. However, you and the vendor should work together during the SLA contract negotiation to eliminate any possible misrepresentations about the process and support and management and reporting methods. For crucial services, you should invest in third-party tools to automatically capture SLA data for an objective measure of performance.
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SLAs are an important part of purchasing and working with SaaS tools. Blissfully can help you manage them and manage and optimize your SaaS stack.
With the Blissfully Platform, you can:
To learn more about how Blissfully can help you manage your SaaS SLAs, request a demo.