Service Level Agreements (SLAs) are a vital part of any outsourcing engagements. Majority of the successful offshore outsourcing engagements today are SLA driven. SLAs help define your expectations clearly from the vendor and also provide you with a measurement system to evaluate the vendor performance and the health of your offshore outsourcing program.

SLA defines the support functions that the Vendor Team will commit to throughout the engagement; assigns priorities to these functions; and establishes baseline service standards and commitments. It becomes the reporting vehicle for the performance measurement and provides the opportunity to identify service-level improvements throughout the engagement.
The service-level commitments contained in the SLA are developed from estimates of current and desired service levels that are subject to fluctuation. Accordingly, the SLA should be viewed as a dynamic document and should be periodically reviewed and changed when the following events occur:
• The environment has changed;
• Clients’s expectations and/or needs have changed; and
• Workloads have changed.
• Better metrics and measurement tools and processes are evolved

The service level agreement should:
• specify the nature of the service provided – E.g. SAP application maintenance support
• identify the provider of and the customer for the service – E.g. Vendor X would provide Web Application development and support for Client’s ABC Division.
• specify the level of the service provided – frequency, coverage, timescales, etc – E.g. the Vendor shall provide 24X7 support services to Client
• incorporate limitations/may include details of the refunds/compensation if things do not go to plan – E.g. the Vendor shall refund the amount of US $ xxxx or x % of the total invoicable amount in case the successful project implementation is not completed on or before June 15, 2007.
• be indicators of quality – E.g. The vendor shall meet the delivery schedules 95% on time during the contract term
• make expectations explicit – E.g. Client would need a dedicated communication link between the vendor and their office in New York with a guaranteed uptime of 99.9%
• assist communication – E.g. There would be weekly conference call between the Client Project Managers and the vendor offshore team to review the progress and clarify doubts, if any
• may help clarify the service which can be expected and what is not available – E.g. The vendor should provide a full time on site co-coordinator for Client. Client should also get it clarified if the onsite co-coordinator would be billed or not billed directly to them
• ensure that providers become accountable for delivering the service

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