Editor's Note: This article was updated June 18, 2009.

• What is an SLA?
• Why Do I Need SLAs
• Who Provides the SLA?
• What's in an SLA?
• What Are Key Components of an SLA?
• What about indemnification?
• Is an SLA Transferable?
• How Can I Verify Service Levels?
• What Kind of Metrics Should be Monitored?
• What should I consider when selecting metrics for my SLA?
• What Uptime Provisions are Typical for Network Service Providers?
• When Should We Review our SLAs?

A service-level agreement (SLA) is simply a document describing the level of service expected by a customer from a supplier, laying out the metrics by which that service is measured, and the remedies or penalties, if any, should the agreed-upon levels not be achieved. Usually, SLAs are between companies and external suppliers, but they may also be between two departments within a company.

A telecom company's SLA, for example, may promise network availability of 99.999 percent (for the mathematically disinclined, that works out to about five and a quarter minutes of downtime per year, which, believe it or not, can still be too long for some businesses), and allow the customer to reduce their payment by a given percentage if that is not achieved, usually on a sliding scale based on the magnitude of the breach.

An SLA pulls together information on all of the contracted services and their agreed-upon expected reliability into a single document. It clearly states metrics, responsibilities and expectations so in the event of issues with the service, neither party can plead ignorance. It ensures both sides have the same understanding of requirements.

Any significant contract without an associated SLA (reviewed by legal counsel) is open to deliberate or inadvertent misinterpretation. The SLA protects both parties in the agreement.

Most service providers have standard SLAs — sometimes several, reflecting various levels of service at different prices — that can be a good starting point for negotiation. These should be reviewed and modified by the customer's legal counsel, since they are usually slanted in favor of the supplier.

When sending out an RFP, the customer should include expected service levels as part of the request; this will affect supplier offerings and pricing and may even influence the supplier's decision to respond. For example, if you demand 99.999 percent availability for a system, and the supplier is unable to accommodate this requirement with your specified design, it may propose a different, more robust solution.