Service level agreements (SLAs) are an important tool in measuring the quality of products or services your vendor provides. SLAs are generally set aside in a document that is separate from the contract (the formal agreement between you and your third-party vendor). While it’s important to remember that the contract and the SLA have different purposes, these two documents should tie together, by reference within each document or by being combined into one document. In fact, incorporating the SLA into your vendor contract is a best practice and the recommended approach to ensure your vendor is meeting your organization’s standards.
The bottom line is this: SLAs should be a key component of every contractual relationship with your third parties.
Including SLAs with your third-party vendor contracts helps set the stage from the onset of the relationship with that vendor and will help ensure that each party’s expectations are met. It can also provide your organization with some level of “peace of mind” (not to be confused with complacency). If established properly, the SLAs should help drive efficiency with your vendor because you both know exactly what is expected and how each are being held accountable.
Specifically, SLAs can be used to accomplish the following:
It’s common for the SLA guidelines to favor the vendor. If the vendor provides the same service to multiple clients, then their SLAs are often static and pre-established. Ideally, the SLAs will be tailored to the products and services the third-party vendor is providing to you. For this reason, it’s very important that you negotiate the terms of the agreement and the SLAs in the early stages of the contracting relationship with a new vendor or when renewing an existing contract.
Regardless of which scenario you are working on, establishing clear expectations of the service level should be stated right up front and should clearly define the following:
If these specific details are not lined out in the SLA language, then no one knows who is responsible for delivering what. At that point, I dare say having the SLA in place will be very ineffective and much like no SLA exists!
This may sound overly simplified, but the surest of strategies is to require the vendor to provide SLAs in their proposed contract language. You might encounter a vendor who does not have any pre-established SLAs and is starting with a blank sheet of paper. Take that opportunity to work with that vendor to help write the SLAs – you know better than anyone your expectations! And, at the end of the day, the relationship you’ve built should be the fuel needed for a long, successful relationship.
Repeated SLA failures may result in penalties or termination of the contract. Be sure to include the specifics of when and why a termination can occur.
Questions to address:
The service level agreement and contract are both essential documents to monitor throughout the vendor lifecycle. A well negotiated SLA is an invaluable tool that can support the vendor contract and protect your organization, should you need to terminate the contract altogether.
And, as they say… it takes two to tango! It also takes two to create a successful relationship, whether that’s with a client or a third-party vendor. So, if you want an effective SLA, be sure to work with your vendor and, hopefully, they’re willing to work with you. If they aren’t, then maybe they aren’t the vendor for you.
Tracking your SLAs is important, but do you know what to include in them and what to do if one is broken? Download the eBook.