A service level agreement typically exercises the clauses as to what any customer will benefit from an independent service provider. However, the deal also is essential for operations such as a company’s sales and marketing.

Either way, it is necessary to sign a service level agreement. This article provides important information regarding a service level agreement and how it functions, who needs it, and why.

What Is a Service Level Agreement?

A service level agreement is drawn and signed between a customer and any service provider or supplier. It defines the clauses as per which the service is provided and mentions the terms by which both parties are bound as responsible.

The provisions in an SLA are arrived at after mutual agreement. Typically, it is a deal that an IT service provider enters into with a customer before the transaction and exchange of any services.

An SLA can exist between a company and its customer, or between two different sectors of the company itself. Whatever it is, service level agreements are typical of three kinds.

Customer-based Service Level Agreement

This is an agreement that exists between a service provider and an external who hires the provider (the customer). It applies to all the services that the two parties exchange.

Service-based Service Level Agreement

This kind of service level agreement exists between the customer and the service provider for specifically mentioned services.

Multi-level Service Level Agreement

This service level agreement has three subdivisions, which includes corporate-level SLA, customer level SLA, and service level SLA.

A typical service level agreement defines and states the clauses that exist in the agreement. It contains commitments by which both parties have to abide. It consists of terms that determine the level of service that an internal or external customer receives over a given period.

In a service level agreement, specification of certain assets and asset types is present. When the agreement is on its execution, those defined lists of assets may be binding to the agreement.

During the creation of an SLA, the following functions can happen:

  • Ranking of the agreement, according to precedence.
  • The setting of dates within the agreement, as per convenience, when the deal will become active and until when it will remain valid.
  • Association of agreements.
  • Association of assets, asset types, and location
  • Inclusion of conditions, clauses, terms, and key performance indicators.
  • Creation of escalations.

A service level agreement is necessary. They are usually in use by IT service providers, cloud computing service providers, and managed service providers.

Why Need a Service Level Agreement?

There are numerous benefits which both parties can reap from a service level agreement. It essentially safeguards the customer’s interests and the service-providing company’s assets and reputation. So, why exactly does one require an SLA?

Establishing Commitment

A SLA is crucial because it clearly states and sets the terms and standards according to which the service is to be transferred and provided. The terms are drawn after mutually arriving at them, keeping in mind the benefit of both the parties.

By settling commitments and obligations, both parties know what they will be expecting from the other. Signing an SLA means agreeing to all the terms stated.


An SLA establishes measures and compensations which the service-providing company should fulfill and meet in case of failure to live up to the terms with which they had agreed.

These compensatory measures are in mention in the agreement itself. It serves as elements that will protect the customer’s interests and reputation in case their service provider fails them.


A SLA assures both the parties. It serves to ensure a written document that holds proof regarding all that was discussed between a customer and a service provider.

Frequently, either of the parties may disagree with the conditions that were previously mentioned. In such cases, the SLA acts as proof of all that was suggested and agreed upon earlier.

Drawing and signing a service level agreement is necessary because it protects both parties from getting a breach in their negotiations. It lays down all that is to be exchanged or transferred between them throughout the commitment.

It is an insurance of the kind and quality of service the customer receives from the provider. The agreement also states clauses that keep in mind the best interests of the provider. If the customer does not meet those clauses, compensations shall be liable.

What Does a Service Level Agreement Consist of?

Numerous service level agreement samples are available for reference and download over the internet. You can refer to a sample service level agreement to know more about the things that are entailed.

With its assistance, you can draft out and write an agreement for yourself. An SLA mentions many things within its domain. A perfect SLA template indicates them all. There are a lot of sections.

  • Details: It includes name of the service provider and customer, name of the customer, address of the service provider and customer, and effective date.
  • Rider Agreement: When signed, this agreement will become an integral portion of the agreement. After its agreement is approved, the agreement will become yearly from being a monthly agreement.
  • Service Levels and Service Credits: All the service level performance criteria to which the provider will remain obligated. Compensatory actions and monetary actions in case the provider fails to meet the customer’s interests.
  • Performance Monitoring: A specific mention of all the tools and procedures which the service provider should provide to measure and monitor the performance of the service offered at the mentioned service level.
  • Objectives: Services should be of the best possible quality. The mechanism by which the customer will be fully aware of the service provider’s failure to provide necessary services.
  • Service Levels And Service Credits
  • Acceptance: It includes the signatures of both the parties—it declaring that they have read and agreed with all the clauses mentioned above.

For further detailed explanations, one can check out service level agreement templates available online.

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Final Words

In conclusion, this was all you needed to know about a service level agreement. We have introduced its uses, its requirements, benefits, and the things that it consists of.

CocoSign can offer you numerous SLA templates. With our help, you can draft a service level agreement for yourself, if necessary. Furthermore, we also offer other essential agreement samples. Check out the CocoSign official website for more information.


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