Service-level agreements defined

A service-level agreement is a contracting tool keyed to the customer's expectations. The customer and vendor determine upfront which services and performance levels will be provided and decide how success or failure will be measured. Meeting or beating expectations may earn the vendor financial rewards; failure can mean earning less money or even a financial penalty.

SLAs generally have three components:

* What are the services to be provided?

* What are the measured targets of service that the customer expects?

* What happens if the service provider fails to deliver the service it promises?

The customer accepts less risk because an SLA makes the vendor responsible for meeting the target service levels. The vendor gains the ability to manage customer expectations, said Oren Gampel, vice president of technology at Oblicore Inc., which designs software to analyze vendors' performance and helps them manage multiple SLAs.