Service Level Agreements

Jimmy Desai is a partner at law firm Beachcroft LLP, in the City of London, and has been advising upon, formulating and implementing SLA contracts and strategies, benefits and cost savings for businesses, since the mid 1990s. Throughout his career he has advised major international blue-chip companies, governments, industry bodies, IT customers and suppliers on their service level agreements. Jimmy writes extensively for a wide range of IT publications, and lectures at international conferences. He is a member of TIPLO, ITMA, SCL, EuroITcounsel, Intellect, and ITechLaw. In the International Who's Who of Internet and E-Commerce Lawyers 2010, Jimmy is listed as one of the top 40 Internet and e-commerce lawyers in the UK.

This pocket guide identifies some of the benefits and the pitfalls that an organisation can encounter when negotiating and drafting SLAs. It gives an overview of SLAs, highlighting typical scenarios that can arise, and provides information on typical solutions that have been adopted by other organisations.
A wide range of industry sectors will outsource service provision (for example, banking, pharmaceuticals, and insurance companies). This can happen where an organisation outsources its IT payroll needs, its helpdesk and IT maintenance requirements, its payment processing, or its whole IT function.

The key risk

The key risk for an organisation that enters into an outsourcing transaction, are that the services that it receives from the supplier will be worse than the services they were receiving before, or that the cost savings that were anticipated or promised, are not achieved.

The SLA

To try and avoid this scenario, the outsourcing contract should include a Service Level Agreement (SLA). The SLA must be drafted to govern the standard of service that you require, including the cost of those services and the consequences of not achieving pre-agreed standards.

The wider environment

While Service Level Agreements are a key method, within ITIL, for setting out how two parties have agreed that a specific service (usually, but not necessarily, IT-related) will be delivered by one to the other, and the standards or levels to which it will be delivered, the basic concept is now far more widely applied than just in ITIL® and ITSM environments.

This pocket guide provides information and guidance on SLAs to those in the wider environment, from a legal and practical view point.

Chapter 1: Why do you Need a Service Level Agreement? Do you actually need an SLA? Document structure Service levels and service level targets Breach of service level targets - compensation and action plans Advantages of defining remedies Major breaches Fairness Other reasons why you need SLAs Summary Chapter 2: Where SLAs go Wrong Legal protection Changes Who prepares the SLA? SLA documents and reality The unused SLA Summary Chapter 3: Building the Foundation for the SLA Codify existing services and standards What services do you want (and need)? Same service cheaper? What are your organisation's responsibilities? Template SLAs Setting service levels and targets Condensing service levels Who calculates the service credits? The SLA report SLA meetings SLA tiers Summary Chapter 4: Drafting the SLA and Key Clauses Key clauses normally included in SLAs Trends Flexibility Communication Worked examples Clauses not normally included in SLAs Examples from case law Exclusive remedy Precedence Sweep-up clauses Clause cross referencing Summary Chapter 5: Managing the Supplier Summary Chapter 6: Negotiating the SLA SLA handover The impact of the IT outsourcing contract Summary Chapter 7: Putting the SLA into Action Changes Increased costs Poor performance Ending the SLA Summary ITG Resources