What is an SLA? How to best leverage service level agreements for success

Clear expectations are the foundation of any healthy business relationship or agreement. This is especially apparent for service providers, as their success is often measured by customer satisfaction. Customers need to clearly understand what service they will receive and how it will be delivered.

This is why Service Level Agreements (SLAs) — documents defining the level of service expected — play a crucial role in the service management industry. SLAs are widely considered a standard agreement among technology service vendors, but it can often be challenging to create an SLA that effectively manages customer expectations and accurately tracks service provider performance.

In this blog post, we’ll dive into exactly what an SLA is, why it’s important, and what the best practices are for creating SLAs that maximize customer satisfaction. Plus, we’ll introduce monday service as a service management platform that helps simplify the SLA management process.

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What is a service-level agreement (SLA)

An SLA is a formal agreement between a service provider and customer that outlines the level of service a business commits to providing. This agreement generally defines:

• The scope of the service offered
• Metrics to measure and assess service performance
• What happens if a service provider falls short in their delivery

SLAs are commonly used across various IT service providers to clarify customer expectations while maintaining a high level of trust and customer satisfaction.

Types of SLAs 

There are three types of SLAs commonly used for various business needs. These include:

1. Customer-based SLAs are unique agreements between a service provider and a specific customer that cover the determined services a customer will receive.

Example: A construction company hires an IT company to cater to its specific service needs.

2. Service-based SLAs are standard agreements provided to all customers using a service.

Example: A cloud-service provider creates an SLA to detail the level of service that will be provided to any customer who uses the service. This may include a guaranteed 99.9% uptime for all customers.

3. Multi-level SLAs – an agreement covering different levels of service standards across multiple groups or levels of a company.

Example: A large company employs a SaaS that will be used across the organization, so an SLA is created to define the different service commitments for various teams (HR, sales, operations) across the organization.

What are the key components of an SLA? 

While SLAs vary depending on each business and the customer needs, a solid SLA generally includes the following elements:

Agreement overview 

This section describes the agreement’s basics, including the parties involved, the time frame for which the SLA is valid, and a basic overview of its goals.

Description of services 

A very clear and detailed section should outline what types of services will be provided and the expected turnaround time for each service.

Exclusions

In this part of an SLA, a service provider specifically states what services are not included to avoid confusion. It might also state specific exceptions for when the terms of the SLA are not valid, like in the case of scheduled maintenance or third-party dependencies.

Stakeholder objectives, roles, and responsibilities 

A list of each involved stakeholder, including their unique roles and responsibilities in the agreement, must be included. This ensures there is a point of contact for specific issues, and that everyone understands who is in charge of what.

Service level objectives (SLOs) 

The SLO refers to the agreed-upon service levels that must be met and distinct ways to measure them. This section includes specific metrics that a service provider commits to delivering. Some of these common metrics include service availability and uptime guarantee, response time, resolution time, and error rates.

Penalties for a breach of service 

An SLA should clearly define the course of action if the service provider does not fulfill its obligations stated in the agreement. These penalties can include financial compensation for the customer, or the right to terminate the contract.

Change processes 

In an increasingly Agile world, SLAs must be able to adapt to evolving business objectives and vendor capabilities. It’s important that there’s a section that describes a clear process for changing parts of the SLA.

Signatures 

For an SLA to be valid, both parties must sign the agreement.

Why are SLAs important? 3 key benefits 

SLAs are widely used in IT and other service industries for a good reason — they provide a structured, reliable way to manage expectations and foster successful relationships between service providers and customers.

SLAs provide many benefits such as:

1. Clear and aligned expectations

By requiring service providers to clearly define their offerings, SLAs ensure customers know exactly what to expect. This eliminates confusion, prevents misunderstandings about service quality, and ensures customers don’t feel misled.

2. Heightened accountability 

An SLA holds service providers accountable for their obligations, as they’re clearly stated in writing with measurable metrics and penalties for breach of contract. Plus, it ensures the right team or individuals know their specific responsibilities, since this is explicitly stated for everybody to see.

Managing an SLA with a collaborative service management software like monday service takes this level of accountability one step further, as it’s simple to tag users in an SLA so that their responsibilities populate within their board of to-dos.

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3. Increased trust

When a legal document is involved, holding both vendors and customers accountable to their end of an agreement ensures everyone will naturally feel a little more at ease. This is especially relevant for customers, because a written commitment that a vendor will execute their services as specified will foster a sense of trust — thus building stronger long-term customer relationships.

Potential risks and challenges in SLAs

While SLAs might seem like a foolproof way to align customers and service providers, maintaining successful and happy customer-vendor relationships, this isn’t always the case. SLAs are extremely delicate agreements with powerful implications; if not managed correctly, service providers may face significant challenges under this agreement.

• Lack of visibility – If SLAs aren’t created and managed on a collaborative platform, it can be difficult for teams to track responsibilities, deadlines, and performance metrics. Without real-time visibility, service providers risk missed targets and SLA breaches.
• Difficult process to amend SLAs — ​​Over time, business needs, technology, and customer expectations naturally evolve — which means SLAs need to be updated. However, many SLAs are built or written in a way that makes revisions time-consuming and complex, creating unnecessary delays and constraints in improving service terms.
• Not enough clarity — If the SLA creation process is rushed or not properly reviewed by all stakeholders, it’s all-too-likely the SLAs will contain ambiguous language or unclear measurement criteria. For example, if a metric like “fast response time” isn’t explicitly defined (ex: within one hour on weekdays), it can lead to misinterpretations and disputes.

The stakes are high if service providers don’t meet their promises made in an SLA because the penalties—which are explicitly stated in the document—can have significant financial or legal implications for a business. But, the good news is that managing and creating an SLA on a service management platform like monday service mitigates many of these risks by providing real-time tracking, workflow automation, and streamlined collaboration.

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Seamlessly track and measure SLAs with monday service 

monday service is an all-in-one, dynamic service management platform that equips teams with all the tools they need to deliver exceptional service. Designed to optimize service operation processes, provide transparent reporting, and streamline communication, monday service is your secret weapon for monitoring and managing SLAs effectively.

Here are some of the platform’s key features for effortless SLA tracking and compliance:

Real-time service analytics 

Gain full visibility into performance metrics with real-time dashboards that visually track KPIs, SLA compliance, and overall service performance. With instant insights, providers can quickly identify and address gaps before they impact service quality.

Automated ticket classification and routing

Leverage the power of smart automations and AI columns to accelerate ticket triaging, automate responses, and set proactive alerts. Our advanced AI features prioritize urgent service requests, and automatically assign issues to relevant agents, ensuring customer inquiries are addressed promptly and that no ticket falls through the cracks. AI automation allows faster and more reliable service interactions, making SLA compliance simple.

Customizable workflow builder 

Use a drag-and-drop workflow builder to create a fully customizable SLA management workflow that includes replies, notifications, follow‑ups, actions, and approvals. The best part is that the workflow is completely flexible and can be changed at any time based on evolving SLA requirements.

Seamless Integrations with SLA management platforms

Keep all SLA-related information centralized by integrating monday service with external tools like DocuSign for contract management. Plus, we offer an integration with a specific SLA app that provides precise calculations for your SLA metrics, and even includes customizable SLA templates.

Best practices for creating an SLA 

While managing your SLA with a unified, collaborative, and dynamic service management software is the most important step for maintaining an effective and compliant SLA, follow these best practices to ensure your SLAs are reaching their full potential.

1. Ensure everything is as clear as possible. Use unambiguous language to guarantee there’s no room for misinterpretation, especially in regard to what services you’re expected to deliver.
2. Ensure stakeholder involvement before SLA is signed. Including all relevant stakeholders in the SLA creation process helps assure SLAs align with business goals, are realistic, and can be effectively met.
3. Make sure metrics are easily measurable. There should be a clear way to determine performance metrics so there are no misunderstandings on what is or isn’t acceptable.
4. Use historical data to provide accurate metrics. While it can be tempting to promise 99% uptime, it’s important to make sure this is attainable. The best way to certify  your metrics are realistic is to analyze previous performance data and gauge capabilities directly from there.
5. Review regularly. Implementing an automated review process is important to ensure metrics are being met and spot potential issues before they escalate.

Uphold SLAs that strengthen customer relationships with monday service

SLAs are meant to empower businesses by improving the quality of service and the customer experience. Make sure your team maximizes the opportunity to build trust and transparency by taking full control over your SLAs with monday service. Try it yourself with a 14-day free trial, and transform the way you track, measure, and optimize service performance for near-effortless SLA compliance.

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