Freshworks’ guide to service level agreements (SLA)

The success or failure of a brand comes down to the relationship established between the business and its paying customers. And there’s a lot that goes into that relationship. 

You have customer support, the website user experience, sales staff attentiveness, and marketing effectiveness, to name a few. But there’s another key component to customer relationships … 

Product and service performance. 

One way businesses can and should establish these relationships is by laying out agreements that guarantee a certain level of service. This instills confidence in the customer and holds the business accountable for its promises. 

It’s what’s known as a Service Level Agreement or SLA. Businesses use SLAs to track and meet customer expectations. They use a series of guidelines and a framework that lays out what happens should certain criteria fall short. Ultimately, it creates transparency for all parties involved.

Customers understand what they’re getting and what happens should they not get it. Businesses understand the expectations of the customer and what it’ll take to keep them happy. 

This makes SLAs a must-have for anyone engaging in technology vendor services or outsourcing work. 

In this article, we’ll explore the importance of SLAs, highlighting their definition, composition, and challenges. We’ll also review tools that can help with SLA management. Let’s take a look.

Service level agreement (SLA) definition

A service level agreement is a binding contract agreed on by all parties that lays out expectations for specific rendered services. This can include IT, customer service, freelance services, and more. 

SLAs describe these expectations and list the penalties for falling short of them and what actions will remedy the situation. An example could be a specific uptime for a SaaS product. The SLA would spell out:

• What the uptime criteria is

• What happens if it’s not met

How the company will make it right — a partial refund, additional services, or credits

Key components of an SLA

When designing SLAs with customers, make sure to include a few critical components. 

Clearly lay out what your services include, what you’re guaranteeing, and any penalties either party can incur for a violation. 

Let’s break this down further. 

1. Service description

The first component that every SLA needs is a strong, detailed service description. 

Be sure to describe everything the customer receives. This includes the scope of services, what they entail, and how to render them. It’s a definition of sorts, showing your hand straight away so there’s no room for misunderstanding. 

2. Service level objectives

The service level objectives (SLOs) laid out in your agreement need to be highly specific and must also be easily measurable by either the business or the customer. 

The SLO is like a mission statement. You’re showing the goals and targets a business must meet to fulfill the agreement. This could be something like customer care response time. 

For instance, “support ticket responses will come in less than 12 hours, excluding government holidays, such as __________”. 

Essentially, service level objectives are minimum quality indicators that a business must meet to fulfill its role. 

3. Performance metrics reporting

The SLA spells out specifically when customers will receive information about the success metrics of their campaign or service. 

For instance, a web host can provide regular updates on server uptime, reporting any outages. This includes explanations and a breakdown of how disruption impacts the business. These metric reports should come regularly at an agreed-upon interval. This could be monthly, bi-monthly, quarterly, annually, and so on. 

The customer also needs to know how the business collects and ultimately measures data before it goes into the report. 

4. Escalation and resolution

When issues need to escalate, there must be a clearly defined procedure laid out in the SLA with contact protocols and resolution requirements. 

For instance, the customer should call their support representative. The representative will then provide updates or a resolution within a set timeframe. This makes sure that any issues that arise resolve properly. 

5. Downtime provisions

If rendered services are online, there must be provisions in SLAs regarding downtime. All online services need to go down from time to time, whether to repair an issue or just for scheduled maintenance. 

This downtime allows services to upgrade systems, both providing additional advanced services to customers and defending against cyber attacks from malicious actors. 

Downtime expectations should be set, along with how the business will ensure minimal disruption to customer operations. This provision also covers the business in the event that a customer tries to complain about scheduled necessary maintenance. 

6. Penalties

Both businesses and customers need to fully understand the protocols and penalties for any violation of the SLA. 

For instance, unexpected downtime that exceeds the allotted provisions mentioned above could entitle the customer to a partial refund or service credit. 

Additionally, if a customer fails to make a payment on time, they could incur a late fee on their next bill. 

Purpose of an SLA

The purpose of an SLA is to protect both the customer and their service provider by describing the responsibilities of both in detail. 

The customer can relax because they know exactly what they’re buying. There’s no room for error or false expectations. 

An SLA protects the business by spelling out its responsibilities, signaling where its service begins and ends. It also helps the business understand what customers want and expect from them going forward. 

Ultimately, the SLA leaves no possibility for misunderstandings that could strain the customer relationship. It allows both the business and the customer to enter into an agreement with no gray area concerning services, expectations, and responsibilities. 

SLA roles & responsibilities

The roles and responsibilities section of an SLA shows where responsibility lies. It’s a list of the key players in the agreement, identifying who the customer is and who’ll be attending to their needs. This could be an account representative who’s the customer’s main point of contact or the head of a specific department. 

It lays out the key responsibilities of each party.  For instance, the account representative is responsible for returning calls and generating reports on the 25th of every month. The customer is responsible for paying all invoices by the first of every month. 

Tips for effective end-to-end SLA management

Businesses managing SLAs need to understand the process of creating, implementing, and upholding these agreements over time. In the sections below, we’ll walk you through four key components of effective end-to-end SLA management.

Creating SLAs

When creating SLAs for your business, there are a few things to keep in mind. 

First off, remember that the SLA needs to come from the customer’s perspective. Everything needs to filter through that point of view. 

It’s crucial that all provisions laid out ‌in the SLA are highly specific. There should be no room for misunderstanding — ambiguity is the enemy of progress in this regard. The more specific and straightforward your language, the more effective your SLA can be. 

Write out the SLA with specific customer behaviors in mind. Create the ideal scenario that both serves your business and the customer’s needs. Promote behaviors like on-time payments and regular progress meetings so you can get what you need and meet the expectations of the target audience. 

A strong understanding of actual customer behaviors held up against desired behaviors can even filter back through the sales funnel to inform future marketing campaigns. 

Think about what’s realistic when laying out your end of the agreement. Setting unattainable goals in the SLA can lead to a disaster scenario where you’re forced to pay out penalties. For instance, set the proper amount of time you’ll realistically need for customer support responses. Use actual data when compiling these guarantees. 

Your goals should be easily attainable, enriching the customer experience. Over-promising in the SLA can lead to losing both a percentage of profits and the customer’s trust. 

Lay out which duties you’ll assign to human staff and which you can automate. Doing this can give you a better idea of what to realistically offer. 

Implementing SLAs

Implementation is where it’s time to put your money where your mouth is, so to speak. 

Before presenting a customer or client with an SLA, you should have a plan in place for delivering on the promises within. That means a fully fleshed-out action plan with internal roles and responsibilities set and ready to go. 

Keep all of your guaranteed service minimums front of mind when delivering. If you start to notice a shift in what you’re able to provide or what the customer expects, make note of it. Keep an internal record of successes and shortcomings when it comes to fulfilling your end of SLAs. 

Track your ongoing performance level and take it into account when renewing contracts or creating SLAs for new customers. If there are areas where the business falls short, ask yourself whether these service gaps can change through an internal policy shift or whether you need to rethink what’s offered to customers. 

Ongoing Management

SLAs should undergo review at least once per year, depending on industry shifts and individual business needs. Examine what you’ve promised along with your success rate in delivering on those guarantees. Consider service performance and deliverables in areas like resolution time and service availability. 

Are there any areas you could optimize? What can you do to either improve the quality of service or offer more reasonable and achievable guarantees to customers? 

SLAs aren’t “set-it-and-forget-it” documents — as the industry shifts over time, you’ll need to adapt and make changes. Use AI systems with predictive analysis to prepare for updates based on audience behaviors. Using these platforms to your advantage can be critical for pre-emptive alterations that allow you to meet those shifting needs without missing a beat. 

If you’re noticing a sharp decline in your ability to meet the terms set in your SLAs, revisit them more often. More frequent SLA reviews might be in order if you’re routinely paying out penalties. 

Upholding SLAs

When the agreed-upon terms aren’t met, it’s important to uphold your SLAs on time. It’s never a good thing when customers have to remind you that you owe them a service credit or discount on their next invoice. 

Instead, be proactive in upholding penalties. It’s possible that customers might not even realize an SLA violation occurred. It’s your responsibility to come clean and uphold your end of the agreement, even when it reflects negatively on your business results. 

If you try to hide it and hope the customer never notices, you’ll compromise your brand image and reputation.

Adapting SLAs for varying business use cases

There’s no one-size-fits-all SLA — these agreements depend on individual businesses and their target audiences. The SLA should reflect both your business processes and customer needs. 

Examine your specific services and average turnaround times and adapt the SLA process to your unique circumstances. 

Here are two business use cases from different industries that properly illustrate how to adapt SLAs to suit you and your customers:

IT service management

An IT service management (ITSM) company looking to create an effective ITSM SLA needs to examine the type of service it offers, the needs of its end user, and what it can accomplish in real-time. 

Take a cloud computing service as a prime example here. Because it relies on cloud-based systems, it needs to factor up-time and maintenance into its SLAs. 

For instance, a cloud-based CRM solution should understand that users rely on its service to track prospects and customers. The customer’s entire business centers around the CRM. 

This means the platform needs to automate tasks, track clients and leads, and integrate other existing services. The customer needs access to cloud services that are always up and a service desk that can handle any issues 24/7. 

It then needs to determine what it can reasonably guarantee. 

If the IT team can promise 99.999% uptime, then that needs to go into the SLA. The IT provider reserves ‌0.001% of the time in the service agreement for scheduled maintenance and any major issues that arise. 

But if the system begins having a lot of issues, it’s possible that 99.999% uptime isn’t possible. 

In this case, the company must come up with a more reasonable number it can meet and update its SLA accordingly. 

Customer service

Customer service SLAs are often considered the backbone of a business, and one of the selling points that could spell the difference between a successful conversion and a missed opportunity. 

A company that wants to include customer service guarantees in a SLA should consider the following: 

• What’s your current call volume like? 

• Are there specific times or seasons where call volume is longer or shorter? 

• What’s your average response time for customer support tickets?

• Does your help desk offer 24/7 support?

• What are the average workloads facing human support staff?

• Do you have an AI chatbot or another automation system that can help handle simple support queries?

• Do you have a quality knowledge base?

• What’s the industry average for customer service response times?

A customer service level agreement should focus on response times and guaranteed efficiency. 

However, you must take hard data and customer behaviors into account if you want these guarantees to set your business up for success.

Identifying & tracking proper SLA metrics

When determining what you should and shouldn’t guarantee in your SLAs, consider several performance metrics that can give you a solid understanding of what is and isn’t feasible. 

Here are SLA metrics that you should track for both the IT service management and customer service industries. 

IT service management SLA metrics

For IT service management companies, track the following key performance indicators for the ITIL before drawing up SLAs:

• Average uptime

• Annual required maintenance

• Server capabilities

• Scope of services

• Average time to restore services

• Service availability

• Average SLA violations and penalties

Customer service SLA metrics

Customer-service-oriented businesses should keep a watchful eye on the following SLA metrics:

• Average support hold times

• Self-service resolutions vs support tickets

• Average response time

• Average handling time

• Tickets resolved in and out of SLA timeframe

• First-time resolution rate

• Ticket escalations 

Common challenges with SLAs

Businesses that use SLAs might encounter some common challenges associated with these agreements. 

They include but aren’t limited to: 

• Setting unreasonable expectations for customers

• Relying on false data

• Failure to anticipate shifting audience needs

• Lack of flexibility

• Over-reliance on customer penalties

• Lack of specificity

SLA tools & software

If meeting SLAs ever becomes problematic, certain tools and technologies can be a great help. 

Automation and help desk software can help you improve your IT service provider duties and streamline your customer support ticketing system. These tools can help you make sure you’ll never have to worry about meeting the goals outlined in your SLAs again. 

Below, we’ve listed two software solutions that can streamline your SLA processes and help you build trust with your target audience.

Freshservice

Freshservice is an intelligent service management solution designed to integrate your various management tools into one platform and empower your IT management team. 

Cutting-edge AI tech allows for advanced incident management, responding to reports of outages and performance issues instantly. This can help you maintain your guaranteed uptime and create a more efficient system that subscribers are happy with. 

The system also tracks workload and capacity automatically, ensuring that no time gets wasted. 

For more on how Freshservice can improve your SLAs, click here. 

Freshdesk

Freshdesk is help desk software designed to automate your help desk ticketing system. This guarantees that issues get resolved far faster, ultimately meeting the support guidelines laid out in SLAs. 

The AI systems built into Freshdesk take in support tickets and automatically route them to the proper agent. It determines routing priority based on criteria like current workload, support agent experience, and more. 

It also uses automation to perform specific tasks associated with ticket maintenance once events transpire. 

Freshdesk also offers self-service support, thanks to its built-in AI chatbot, knowledge base management, and specialized help widget. All of this together can make a huge impact on your helpdesk SLA.

For more on how Freshdesk can improve your SLAs, click here. 

Getting started with SLAs

SLAs can help businesses establish the all-important trust needed to forge long-lasting relationships with customers. 

There’s so much that goes into creating the perfect SLA. By following the advice listed above, you’ll be able to create an effective and manageable SLA that serves customer needs. 

To help meet the audience’s needs as outlined in your SLAs, consider winning tech solutions like Freshservice and Freshdesk. They’ll keep your teams organized and ensure that you’re fulfilling the service promises made to your loyal customers. 

Here’s to your success!