Question 1

What should a service level agreement include?

Accepted Answer

At minimum: the specific metrics being measured (uptime, response time, resolution time), how they are measured and reported, the target thresholds, remedies when targets are missed (service credits, fee reductions, termination rights), exclusions (scheduled maintenance, force majeure, customer-caused issues), and the reporting/claim process. The best SLAs are specific and measurable.

Question 2

What is the difference between an SLA and a contract?

Accepted Answer

An SLA is usually part of a larger contract - either embedded as a section or attached as an exhibit or schedule. The contract covers the full business relationship (payment, liability, IP, termination). The SLA specifically covers performance standards and remedies for not meeting them. You can have a contract without an SLA, but you should not have a standalone SLA without an underlying agreement governing the broader relationship.

Question 3

What does 99.9% uptime actually mean?

Accepted Answer

It means roughly 43 minutes of allowed downtime per month, or about 8.7 hours per year. 99.99% (four nines) means about 4.3 minutes per month. 99.95% means about 21.6 minutes per month. The difference between 99.9% and 99.99% sounds small but it is a 10x reduction in allowed downtime. For mission-critical services, that distinction matters enormously.

Question 4

Are SLA credits the only remedy for poor performance?

Accepted Answer

Credits are the most common remedy, but not the only option. Some SLAs include escalation procedures (priority support, dedicated engineers), fee reductions, or termination rights if performance consistently misses targets. For critical services, negotiate a termination right triggered by repeated SLA failures - service credits alone will not compensate you if persistent downtime costs you customers.

Question 5

Can I negotiate SLA terms with a large vendor?

Accepted Answer

Enterprise vendors will negotiate SLA terms, especially for larger contracts. Focus on the metrics that matter most to your business, the measurement methodology (make sure it is not rigged in their favor), and meaningful remedies. Standard vendor SLAs often cap credits at one month's fees - push for higher caps if the service is critical. Smaller vendors or standard SaaS products usually offer take-it-or-leave-it SLAs.

Question 6

What happens if there is no SLA in my service contract?

Accepted Answer

Without an SLA, you have no defined performance standards and no pre-agreed remedies for poor performance. If the service goes down for a week, you would need to argue breach of contract based on implied terms - which is expensive and uncertain. Always include an SLA for any service you depend on. Even a basic one with uptime commitments and response times is better than nothing.

Service Level Agreement (SLA)

Definition

In Practice

Example Clause

Common in these contract types

Related terms

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