If you’re one of the 45% of businesses that are considering outsourcing part or all of your IT work to a managed service provider (aka an MSP), you’re probably wondering about some of the nitty-gritty details.
If you’re looking to take some of the IT burden off your organization, you are probably looking for ways to streamline your IT spending, which means paying attention to each and every detail.
Amongst these crucial details to iron out with your MSP is what’s called a Service Level Agreement or SLA. At its most basic level, the SLA is your contract with your managed IT provider, but as with everything in IT and tech, understanding an SLA can be difficult for anyone who doesn’t know what they’re looking for.
What is a Service Level Agreement (SLA)?
A Managed IT Service Level Agreement is, at its core, a contract between you and your MSP. While the elemental function of it is to outline the services the MSP will provide to you, the client, a good IT SLA goes even further.
Any SLA should be a crystal-clear delineation of the quality, scope, and responsiveness of those services, with no ambiguity. It should outline not only what elements of your IT your provider is going to handle, but how they’re going to handle them. It covers things like cybersecurity, infrastructure, personnel, emergency response, and so on.
Like any contract worth anything, an SLA clarifies the expectations on both sides of the partnership and erases any ambiguity of duty. Some of the key questions the SLA answers are:
- What services are expected of the managed service provider?
- How long will the contract run?
- How are costs incurred? Are they variable or fixed?
- What level of service is offered? How many and what types of IT professionals will be working on your account?
- How often are systems monitored? Will the systems be monitored 24/7?
- Is cybersecurity included in the SLA? If so, to what extent?
- How will both parties know if the partnership is successful? What metrics or KPIs will be used to gauge success?
- What happens in an emergency? How long can you expect for a fix?
Now, let’s take a look at some of the specific elements of an SLA!
Service Description
The Service Description is a detailed list of each and every service that the MSP has agreed to offer the client. This could include a wide range of IT services like network management, server maintenance, data backup and recovery, software updates, cybersecurity measures, helpdesk support, and more.
The Service Description should be comprehensive and specific, including all deliverables and explicitly stating any services that are not included. Again, like any good contract, being as detail-oriented and specific as possible here is crucial as it minimizes the possibility of misunderstandings and sets clear expectations.
The description should also include the specifics of the process of how these services will be delivered, their objectives, and the resources required to meet the services outlined in the SLA.
MSPs offering cybersecurity services might detail in this section the types of security measures they provide. This could include firewall installation and management, antivirus protection, intrusion detection and prevention systems, and regular security audits. Additionally, you might see mention of the frequency of these services—for example, security audits might be performed quarterly. They might also specify what is not included, like physical security measures.
Quality of Service
The Quality of Service (QoS) section of a managed IT SLA outlines the standard of service that the MSP commits to provide. It includes measurable metrics for assessing the quality of service, such as uptime (the amount of time services are available and operational), performance benchmarks (like speed and efficiency of service), and other technical performance indicators.
It may also include specifications about the hardware, software, and other technologies that will be used to provide the service. The MSP must ensure that these standards align with the client’s business requirements and industry standards.
A really common example is uptime – you often see things like an MSP committing to an uptime of 99.99%. Another is data storage and frequency. You’ll want your MSP to outline specifically how frequently your data is backed up and how quickly any issues will be addressed in this section – so you can not only budget but account for any outages.
Responsiveness of Service
Responsiveness is basically how easily you can get a hold of your MSP when something goes wrong.
This section usually includes definitions and classifications of different types of incidents, each with its own designated response time. For instance, a high-severity issue, like a server outage affecting all users, might have a response time of 1 hour, while a medium-severity issue, like a software bug affecting some users, might have a response time of 4 hours.
How quickly your MSP can and will address your issue depends on your business and your size as well– a register going down at a grocery store will be less important than a bank being hacked
Penalties for Failure to Meet Agreed Terms
This is the section that stipulates the consequences if the MSP fails to meet the service levels defined in the agreement. Penalties often take the form of “service credits” – IT-speak for “refund.”
For example, if the MSP fails to meet the agreed 99.99% uptime, there might be a clause stating that for every 0.01% drop below the agreed uptime, the client is entitled to a 1% service credit on their monthly bill. So, if the actual uptime for a month is 99.95%, the client would receive a 4% credit on their bill for that month.
In general, this section serves as a guarantee for the client – as well as motivation for the MSP to bust their buns to meet the SLA’s parameters.
Performance Measurement
This part of the SLA details the metrics that will be used to assess the MSP’s performance. Common metrics for MSP performance include:
- Uptime/Downtime: The amount of time services are expected to be available versus how much they’re down. This is often represented as a percentage, like 99.99% uptime.
- Response Time: The time it takes for a provider to respond to a service request or incident.
- Resolution Time: The time it takes for an issue or service request to be resolved, from the time it was first reported.
- First-Call Resolution Rate: The percentage of issues that are resolved on the first contact, without the need for further follow-up.
- Throughput: The amount of work or number of transactions that a system can handle in a given amount of time. A measure of efficiency.
- Error Rate: The frequency of errors or faults in the service.
- Network Performance Metrics: These can include bandwidth, latency, jitter, and packet loss for services involving data transmission.
- Backup Success Rate: The percentage of successful data backups, compared to attempted backups.
- Recovery Point Objective (RPO): The maximum age of files that an organization must recover from backup storage for normal operations after an outage.
- Recovery Time Objective (RTO): The target time within which a business process must be restored after a disaster or disruption.
- Customer Satisfaction Score (CSAT): A measure of how satisfied customers are with the service they’re receiving. This data is usually collected through exit surveys.
- Ticket Volume: The number of service requests or incidents reported within a given time period.
- Escalation Rate: The percentage of service requests or incidents that need to be escalated to higher levels of support. Lower numbers are better.
Regular reporting on these metrics is often included, providing the client with a transparent view of how well the MSP is meeting the agreement’s terms.
Conditions of Cancellation
Once again following the simple rules of an effective business contract, most SLAs will have a section that outlines the terms under which either party can terminate the agreement.
The conditions will typically include notice periods, the process for termination, and any fees associated with early termination. These are usually boilerplate across managed IT service providers. Termination periods are usually 30 days long.
The Types of Managed IT Service Level Agreements
SLAs come in different shapes and sizes, each tailored to the specific needs of the customer and the nature of the service provided. They can be broadly classified into three types: Customer-based, Service-based, and Multi-level SLAs.
Customer-based SLA
A customer-based SLA is, as you might expect, tailored to the individual company’s unique business operations. This SLA outlines the services provided, the level of service, and the terms of the relationship. Usually, these contracts are a formality, as the contract has been catered to the pre-discussed needs and wants of the customer.
Service-based SLA
A service-based SLA revolves around the specific service or product chosen by the customer. Rather than a Customer-based SLA, this one is less customized to specific needs and is based on the service that the company is providing. These tend to have each service item with its own unique SLA that details the service provided, the cost, the scope, and when it will be delivered.
Multi-level SLA
A multi-level SLA is an agreement where an SLA is divided into multiple tiers or levels. With a multi-level SLA, the managed IT service provider creates an overarching plan that is encapsulated by the SLA, but within the main SLA, it is then divided into smaller chunks, based on how the company is arranged. In other words, a multi-level SLA allows an MSP to cater to a series of customers within one organization, using a single service.
This is usually necessary for big organizations that are outsourcing massive amounts of IT infrastructure. In this situation, the service provider has to break up their service into smaller units to address each unit’s individual needs. It’s basically like a Customer-based approach, but in smaller cells so as to meet the smaller businesses that need help.
Make Sure You Have An Ironclad SLA
Any business owner on the planet is going to do their due diligence when it comes to such a strategically critical function as IT. With IT costs continuing to grow amidst record inflation, every business owner should be weighing the costs and benefits of outsourced IT.
When considering potential IT providers, make sure you comb through their SLA like you’re a school nurse searching for lice. You’ve got to make sure that, at the very least, they’ve got all the essential components listed above. Then, have your lawyer look at it to make sure everything is fit and proper.
In today’s world, an IT partner can be the most high-value investment you can make – but always, always make sure you’re protecting your business and its crucial IT infrastructure.
Companies Are Switching To Managed IT Services
As we’ve explored in earlier posts, companies around the world are seeing the benefits of managed IT services. We know that we’re (a bit) biased, but the facts also back us up here – let’s look at the facts from a recent study on IT cost savings:
- 50% of companies who engaged an MSP saved 1-24% in annual IT costs!
- 33% saved 25-49% by hiring an MSP!
- 13% reported savings of more than 50% by switching to managed IT
The reality is most companies see cost savings of some kind, but the real savings – at least in our experience with customers – are mental. The stress and worry of having to hire and manage your on-site department? Simply not worth it.
Chat with us today and let’s see how we can help!