Internal Service Level Agreement Basics

An internal service level agreement is a service level agreement (SLA) that is used to maintain a level of service internally, within an organization, rather than with an external party. Internal SLAs may apply to help desk services, network or application availability and performance, and any other internal processes. A typical service level agreement will cover:

  • The services provided. What a service provider will do in exchange for compensation. Vagueness here can lead to future contract disputes.
  • The service reliability. When the service will be available and the acceptable level of service outages.
  • The service responsiveness. How punctual the service should be and how often servicing should occur, if it is a service that is provided at scheduled times.
  • Problem reporting procedures. If a problem occurs, who can be contacted how and when they can be contacted, and what processes will be followed to resolve the problem?
  • Service level monitoring. How the level of service will be monitored and who will do the monitoring, as well as how the information culled from the monitoring will be reported.
  • Performance penalties. If the service level is not maintained as per its definition in the contract, repercussions will have to occur because of this contract breach.
  • Escape clauses. If there are to be any circumstances in which a failure to maintain the service will not be penalized, they should be stated. This is sometimes referred to as the force majeure portion of the contract.

When it comes to level of service as defined in a contract, such service levels should be specific and measurable. Otherwise, measuring service will be difficult, as well as rewarding good service and penalizing bad service. To this end, an SLA will often use technical terms to quantify service levels such as mean time between failures (MTBF) and mean time to recovery (MTTR).

Creating an Internal Service Level Agreement

Creating a typical internal service level agreement is a five-step process, the steps of which are:

  1. Set up internal meetings. These should be conducted between the managers of the internal departments involved in order to define the expectations and requirements of the parties involved.
  2. Define performance metrics. In the inter-department meetings, response times or any other pertinent metric used to define performance should be agreed upon. Defining the minimal and optimal service levels is necessary in order to create a meaningful SLA; otherwise, holding a service provider accountable will be difficult. The service levels that are ultimately agreed upon should be realistic and quantifiable.
  3. Define penalties and rewards. Creating a meaningful SLA will also involve attaching a system of performance penalties and incentives to it, without which the SLA will be essentially unenforceable. Penalties for below-par performances in a typical internal SLA will include budget decreases or, if the business has an internal payment process, service reimbursement fees. Rewards for meeting or exceeding service levels could include cash bonuses, parties, and extra vacation days. The penalties and rewards do not need to be excessive; they just need to incentivize performance.
  4. Set up a monitoring system. In order to ensure SLA compliance and know when penalties and rewards are to be doled out, a monitoring system will have to be in place. Lucent Technologies and InfoVista are just two examples of companies that provide such systems, although you will not necessarily need a third party to provide SLA monitoring services. For some businesses, a simple Excel spreadsheet or other type of database will be all that is necessary to accurately measure performance. What is important is that performance levels are measurable and they are measured accurately.
  5. Sign and review. Once the terms of the SLA are agreed upon, the SLA should be signed by the parties involved and then reviewed and revised (if necessary) at least once a year. This review process should occur because of technology’s rapid pace of advancement, which in fact can cause an industry’s expected response time to change on a monthly basis. Thus, an SLA should be frequently updated to prevent it from becoming obsolete.

Making the effort to set up an internal SLA will help clarify expectations amongst internal departments and increase efficiency. If you need further help understanding internal service level agreements, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.