A service level agreement is basically a legal contract between at least two parties that stipulates what the service provider (the Seller) is offering as a service to the client (the Buyer of the service.) Contrary to what many might believe, a service level agreement is not cast in stone once the Buyer has created it. A Seller or service provider can negotiate the content of the service level agreement to a certain degree so that he can secure favorable terms for his business that will provide the service. If all Buyers (or client companies) were able to dictate the terms by which the service level agreement functions, then business would be terribly one-sided and many Sellers would go out of business soon enough.

If, for example, the service level agreement concerns the call center industry, the service level agreement will incorporate certain terms common to that particular industry:

– First Call Resolution (FCR): this is computed as a percentage of inbound calls whose problems the agent may provide solutions for without having to resort to callback (meaning the client making the inbound call need not call succeeding times to get a solution to his problem.)
– Time Service Factor (TSF): the percentage of inbound calls which were answered within a specific period of time.
– Average Speed to Answer (ASA): defined as the average time required by the service desk to answer a call.
– Abandon Rate (ABA): this indicates the percentage of calls that clients abandoned after waiting for an answer.

A basic service level agreement will have some common elements regardless of what type of industry the agreement was developed for:

– definition or naming of the specific service/s to be provided by the Seller;
– the way the Seller or service provider will be gauged as to his service performance;
– problem management;
– the responsibilities, obligations and duties of the client (or Buyer of the service);
– warranties;
– protection and recovery from unforeseen problems (such as natural disasters, airplane crash, or fire);
– and clauses that state how the agreement will be completed and/or terminated (including stipulations about possible penalties on the Buyer and/or Seller if they take certain actions or fail to take certain actions.)

The elements of any service level agreement examples can be categorized as either management elements or service elements. Management elements are components such as the way the effectiveness and efficiency of the contracted service will be monitored; how the data being monitored will be communicated and who will make decisions based on such data; how misunderstandings and differences of opinion regarding service will be approached; and when the agreement ought to be amended by both parties. Service elements talk about the service itself.

Service level agreements have become more common nowadays because of the growing use of outsourcing to tap companies for their services. Even government agencies are choosing to outsource their functions rather than maintain costly in-house bureaucratic arrangements that are unwieldy and end up costing taxpayers more money in the end.

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