Service Level Agreement (SLA)

Last Updated: May 1, 2017

Definition - What does Service Level Agreement (SLA) mean?

A Service Level Agreement (SLA) is the service contract component between a service provider and customer. A SLA provides specific and measurable aspects related to service offerings. For example, SLAs are often included in signed agreements between Internet service providers (ISP) and customers.

SLA is also known as an operating level agreement (OLA) when used in an organization without an established or formal provider-customer relationship.

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Techopedia explains Service Level Agreement (SLA)

Adopted in the late 1980s, SLAs are currently used by most industries and markets. By nature, SLAs define service output but defer methodology to the service provider's discretion. Specific metrics vary by industry and SLA purpose.

SLAs features include:

Specific details and scope of provided services, including priorities, responsibilities and guarantees
Specific, expected and measurable services at minimum or target levels
Informal or legally binding
Descriptive tracking and reporting guidelines
Detailed problem management procedures
Detailed fees and expenses
Customer duties and responsibilities
Disaster recovery procedures
Agreement termination clauses

In outsourcing, a customer transfers partial business responsibilities to an external service provider. The SLA serves as an efficient contracting tool for current and continuous provider-customer work phases.