Simply speaking, a Service Level Agreement is a contract where the level of service to be provided is clearly defined to ensure both parties have a common understanding of the final outcome.
This type of agreement is commonly used to formally set up a project which includes a defined date (delivery time) by which the service must be provided and the terms and expectation level of that service (performance). In most cases it will be very specific and include an expectation of quality of the services to be provided, warranties for the services to be provided and responsibilities of the parties. The level of service may include things such as defining exact materials to be used and procedures to be carried out when doing tasks to complete the service.
A Service Level Agreement may be used to sign up an internet service provider or a website contractor to help you set up your website. The contract should outline the nature of the service to be provided and should include detailed descriptions of work to be completed, time frames within which to complete the work, clear guidelines on expectations of quality of work, payment schedules and similar items which clarify the level of service that is expected.
Service Agreement example
On a larger scale, a Service Level Agreement may be used in the construction industry when used, for example, to rent cranes. Companies conducting large scale building projects will rent a crane that may be specific to their needs. A crane company will then negotiate and provide a crane that must be used within certain guidelines but must meet the requirements of the construction company.
Here the Service Level Agreement will be very important. If a crane is provided that cannot meet the requirements as specified by the construction company in the agreement, it could be very costly for a crane company to bring in a replacement crane that does meet the service level requirements. Additionally, in this type of Service Level Agreement there will be a specified time frame for service delivery and various technical requirements stipulated.
The above examples outline how a Service Level Agreement can be used for both small and large scale dealings. These agreements will contain common understandings between the service provider and the customer as to the type and nature of the arrangement, type of service, delivery time, performance, warranties and priorities between the parties.