How Do We Define Service Level Agreement?

Core services can also be used to mean the core competencies of any organization, meaning these core services would be the strengths that the organization feels competent to function in. Among the core services of any organization would be the departments or divisions of technical support, customer service, professional services, and revenue generation (among others.) Even if your workforce is very skilled and motivated, it is highly possible that you will need to outsource certain services that used to belong to the core services or competencies of your organization. Some factors that would influence the decision to outsource competencies could be: cost of performance, problems encountered in the past, employee attrition (due to pirating or headhunting by competitors), higher costs of doing business (due perhaps to suppliers of key services hiking their prices or natural rate of inflation); or advances in technology (that make it impractical to pursue training of personnel in-house and continue operating in those core competencies.)

A core services service level agreement can then be used to describe a formal arrangement by which the core services or competencies of an organization are assigned (for a fee or rate of compensation of some sort) to another organization. This does not necessarily occur only in business; even government agencies such as the US military are known to outsource core competencies to privately-run companies nowadays.

One problem with outsourcing core services is that bribery may occur when the core services service level agreement is not specific enough or does not include enough controls that will keep the transaction of the service aboveboard and without blemish. For instance, the US Pentagon came under severe criticism from the US Senate recently over certain allegations of fraud related to outsourced contracts to consultants. To prevent this from occurring (or at least minimizing such instances), it is important that the core services service level agreement be specific, thorough, direct to the point, and comprehensive enough to pass scrutiny by any party (even third parties not directly affected by the agreement.) In the example we cited, the concerned third party was the US Senate, which certainly has the right to question any issues that raise a cloud over the reputation of the US Pentagon.

In technology-based industries, such as the Information Technology industry, core services may be outsourced because profit margins are growing smaller, products being developed are more complicated than earlier versions, and customer demands are also becoming more complex and difficult to meet. To keep organization leaders and personnel sane, it may be prudent to outsource certain core services rather than drive everyone crazy trying to keep up. But before outsourcing, it is necessary that certain concerns, specifically security, cost, and quality of the retained professional services be addressed fully so that a very good core services service level agreement can be produced. If these concerns are not addressed, the agreement produced may be so full of holes that problems will eventually crop up whether anyone likes it or not.

A service level agreement is simply a stipulation within a service contract where two parties come to an agreement regarding a particular service that is needed for the project. There are always at least two parties who are covered by the service level agreement: a person or entity who will provide the service needed (who will formally be called a service provider) and a person or entity that needs the service and will decide whether to hire the service provider or not.

Service level agreements first came into the attention of the public back in the 1980s when fixed line telecommunication services providers defined and delineated service level agreements to their corporate clients. Nowadays, service level agreements have been adopted more fully by the Information Technology departments of major corporations when dealing with other departments in the same enterprise. In such a case, the service level agreements help provide a benchmark by which service providers are measured and by which corporate leaders may decide whether to outsource the service in question or not.

A service level agreement usually lacks very technical details, with any technical information being set out through either Service Level Objective (SLO) or through Service Level Specification (SLS). The SLS in particular helps to provide operational guidelines by which the service provider should abide when offering the service. The SLO functions mainly to state what goals should have been reached by the service provider after the contract ends.

Service level agreements have also become more common now that outsourcing has become very popular with many organizations, both private and government-owned. When outsourcing contracts use service level agreements, penalties for the inability of the service provider to supply the service in the manner and timeframe specified will be imposed.