SLA

What it means

An SLA is an agreement on service level: what exactly is provided, at what availability, with what response time, and with what consequences if it is missed. Without that last point it is a statement of good intentions.

Response time - how quickly the provider gets back to you - is distinct from resolution time, by which the problem must be fixed. Contracts often state only the first, which in a critical outage is a decisive difference.

An SLA is not a KPI. A performance indicator is something a company tracks for itself, and missing it has no direct contractual consequence; an SLA is a commitment to the other party, so the way it is measured has to be agreed so that both sides can verify it the same way from the same data.

How it works in practice

For IT services, availability is set as a percentage (uptime) with a maintenance window. For accounting services it is deadlines instead: by when documents are processed, when filings go out, how quickly a question is answered.

An SLA includes how to raise an issue, an escalation matrix and the rules of escalation. In a supplier relationship it is usually a schedule to the mandate contract.

In our contracts the SLA runs both ways: the processing deadline starts only once the client has delivered a complete set of documents. If documents arrive late our deadline moves too, and the client knows in advance by when they must reach us for the VAT return to be done without a rush or errors.

What to watch out for

High availability on paper is not the same as reliability: 99.9 % a year is almost nine hours of downtime. Under outsourcing you have to measure whether the SLA is actually met - otherwise the parameters are recalled after the first incident, when they no longer help.

The sanction in an SLA is often only a discount on the monthly fee, while the contract excludes any further damages. After an outage that cost the company a missed deadline or lost sales, it gets back a few per cent of the flat fee; real protection comes only from a contractual penalty or from keeping the right to claim damages.