How to write a service-level agreement (with template)

SaaS Buying

Written by

Ashlee Tilford

Published on

April 29, 2022

August 4, 2022

A service-level agreement (SLA) is a contract between two parties that defines the deliverables, obligations, and expectations of each party. SLAs are essential in SaaS buying.

Understanding how to write a solid service-level agreement will help a business establish accountability with service providers and set realistic expectations with stakeholders while also enhancing risk mitigation. 

This post covers the details of how to write a service-level agreement and provides an SLA template for businesses to use.

What is a service-level agreement?

An SLA serves several critical purposes. It is a contractual document that acts as an ongoing reference point for service and reliability expectations, like uptime guarantees, response times for issues, and resolutions for downtime. It covers important details like length of contract, price, renewability, and scope. An SLA also outlines customer responsibilities to ensure the service is used within the standards set by the service provider.

Related: Service-level agreement (SLA) basics to improve your SaaS buying process

The 3 types of SLAs

Depending on the business, there are different types of service-level agreements that may come into play. 

Customer service-level agreement

A customer service-level agreement is needed when there is an agreement with a supplier to provide service to a customer. For example, a SaaS supplier will need to create a customer SLA and SaaS license agreement if it is going to provide SaaS access to a customer. 

Internal service-level agreement

Some businesses create internal service-level agreements to ensure alignment between in-house stakeholders, like IT, sales, and marketing. It is common for businesses that have customer service-level agreements to also have corresponding internal service-level agreements. 

If the business has entered into a customer service-level agreement to provide its SaaS solution to a customer, it may also do an internal service-level agreement with IT for help desk or support services for that customer SLA. 

Multilevel service-level agreement 

A multilevel service-level agreement is used when there is more than one service level that needs to be addressed. The multilevel SLA may combine the customer SLA and internal SLA, depending on the situation. This type of agreement helps businesses avoid overlapping or incongruent SLAs. 

What to include in a service-level agreement

Before moving into the details of a service-level agreement template and how to create one, it’s just as important to be able to quickly identify if an SLA contains all of the elements it needs.

Who is involved with creating an SLA

Regardless of the type of SLA, it should begin by addressing the parties to whom the agreement pertains. It may also reference a master service agreement (MSA) if there is one already in place. 

What terms in the SLA mean

Terms can have different meanings to different people, depending on their experience and their industry. Defining terms at the beginning of the agreement is essential to ensuring the parties entering into the agreement are aligned. Once defined, the terms should be used consistently throughout the agreement, avoiding synonyms or industry slang. 

What services are being supplied

Identifying the exact services being supplied under the service-level agreement eliminates any ambiguity about what the supplier is providing for the stated cost or discrepancies between customer expectations, service provided, and quality of service. This may also be called a scope of work.

What the costs are

An SLA should include all costs associated with the services being provided under the agreement. There should never be surprise costs that pertain to the scope of work. Itemized pricing for all aspects of service must be listed, including responsibility for any applicable taxes or other fees. It should also state that any services added that are beyond the scope of work in the SLA will be quoted separately.

What the responsibilities are of each party

Regardless of which party created the SLA, it must include a section of the detailed responsibilities (also called warranties or representations) of each party involved in the agreement. If any party in the agreement does not uphold its responsibilities, it is considered a breach. 

For SaaS agreements, this section may include items such as the terms of delivering the services, guaranteed uptime, outage management, support guarantees, performance levels, data security, compliance, use of subcontracts, proprietary rights, rules around assigning the agreement to a third party, and governing law. 

How the ongoing management of this agreement will be handled

An SLA should include an explanation of how the agreement will be managed on an ongoing basis. It will address items like renewals and whether they will be automatic or issued a stated number of days before the end of the agreement period. The agreement should detail terms surrounding cancellation. 

For example, perhaps the SLA must be canceled 60 days before the end of the term. A termination clause addresses what happens if either party breaches the contract. The SLA will also address how all parties should handle price increases. 

How the parties will handle legal matters

An SLA includes a section, often called indemnification or hold harmless, that describes an agreement of limitation of liability and indemnification for either party. For example, if a supplier’s SaaS solution hosts confidential customer data and that data is breached resulting in a third-party lawsuit, this section addresses liability, time limits, maximum compensation, and so on.

Any other agreements or addendums

If the SLA references any other agreements or addendums, the SLA should include them as exhibits at the end of the agreement. This could include a master services agreement, additional related SLAs, or changes that have been made to the SLA. For example, a customer might want to include their own SaaS rider that includes some internal SaaS governance as an addendum to the SLA. 

TEMPLATE: Service-level agreement to use when writing software contracts

The following easy-to-use SLA agreement template is intended to assist businesses to create their own. Here are the elements of an SLA and what should be included in each. 

Introduction

  • The parties represented by the agreement
  • The name of the service being provided
  • The expected service dates (timeframe to and from)
  • The effective date of the SLA
  • Acknowledgment of all parties

Objectives or purpose

  • Goals of the agreement
  • Company goals
  • Marketing goals
  • Sales goals
  • IT goals

Overview, or scope of work

  • An issue/resolution statement, or what the solution is to provide or resolve
  • A description of the scope of work to be performed under the agreement

Service commitment

  • Requirements of the service provided under the agreement
  • Level of service to be provided
  • Service assumptions
  • Service performance roles and responsibilities of the supplier
  • Performance standards
  • Service availability
  • Guaranteed uptime
  • Downtime resolution
  • Data security
  • KPIs and other performance metrics
  • Exceptions and exclusions
  • Service credits

Customer responsibilities

  • Anything the customer must provide to make appropriate usage of the solution (e.g., end user workflow data) 
  • The process by which a customer notifies a supplier of changing needs
  • Payment term responsibilities
  • Supplier’s SaaS usage requirements 
  • Exceptions and exclusions

Terms of termination or cancellation

  • Termination due to a breach of contract
  • Cancellation before the end of a term 
  • Cancellation at the end of a term 

Contract management

  • Renewal processes
  • Changes to pricing
  • Escalation procedures
  • Other changes to the SLA

Indemnification

  • Limitations of liability
  • Governing law

Acceptance 

  • Company name
  • Party signature
  • Acceptance date

How Vendr can help you navigate the ins-and-outs of software and service contracts

Outsourcing SaaS management to Vendr, a third-party SaaS vendor management supplier, is one of the most effective ways to reduce the knowledge needed and time spent on service-level agreements. While businesses are still included and invested in SLAs, Vendr’s platform uses extensive SaaS industry knowledge to navigate and manage them so procurement and senior leadership time can be spent on more strategic initiatives.

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So far this year, we’ve helped customers keep pace with the changing landscape of SaaS buying, helping them save over $240m in savings along the way. 

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“I’m seeing customers in industries that provide a ‘nice to have’ service cutting back on their contracts more than others, as they are likely anticipating a downturn.” - Aubrey Zimmerman, Senior Executive Buyer.

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Today’s business software is centered around email, the original killer productivity app, which has become a 2-horse race: G Suite vs. Office 365. The good news is that both products are good and getting better quickly as competition continues to heat up.

We’ll review the benefits and challenges of each of the platforms, and offer our recommendation. Before getting started, we do not recommend hosting your own email, using a non-major email provider, or maintaining any on-premise servers for something as mission critical as email and core productivity software. Today’s cloud offerings have long surpassed the reliability, quality, and scalability of non-cloud products.

Office 365 Overview

Though Microsoft long ruled the business productivity world with Office and Exchange, it was slow to evolve to the cloud world, which opened up a window for Google. Over the past few years though, under Satya Nadella’s leadership, Microsoft has made a concerted effort to close this gap and focus on cloud and mobile. Office 365 is the result of this focus, and given its importance, we’ll likely continue to see rapid improvements on this front.

There are several misconceptions about what exactly Office 365 is, which is mainly Microsoft’s own fault in its confusing pricing and packaging.

Many people think it’s ONLY an online version of Office, like G Suite, which turns some people off, but it’s actually the unified brand name for all of its Office productivity offerings, including email, downloadable software, online productivity apps and more. There is a version that offers only online versions of Office a la G Suite (Business Essentials), but there’s also a license that enables users to download FULL desktop versions of Office applications. And most (but confusingly not all) licenses include generous 50GB of email. (We’ll get to pricing details later).

Basically Office 365 in its various flavors is a full productivity suite designed to compete fully with Google for Work.

G Suite for Work Overview

G Suite is Google’s alternative to the Microsoft hegemony. G Suite has matured significantly since its humble beginnings of Gmail and Google Docs, bringing a powerful platform of email, productivity software, file sharing, and more to businesses for a simple low price.

Google now has over 2 million businesses paying to use Google for Work, so you can be confident in the performance and rapid improvement of the platform.

Other Alternatives

We’ve deliberately not included other alternatives because they’re simply not complete enough for most business usage. The iWork Suite from Apple has some unique benefits (e.g. Keynote is best in class beautiful slide deck preparation), but lack of email offering and robust collaboration tools make it ill suited for the full workload.

Summary Recommendation (tl;dr)

In this article we’re going to dive deeper to compare the benefits of each platform, however in keeping with our philosophy, we want to make opinionated and justified recommendations to make your life easier. So for those of you who like the conclusion up front, here’s our recommendations.

For MOST companies, especially new companies, we’d recommend to go with G Suite for Work. The pricing is simpler and more fair, the collaboration tools are better, the platform is improving very very quickly, it has tons of extensibility to make your experience even better, and it’s the choice of most technology startups these days. G Suite is also easier to set up and manage without the help of an IT department or sales rep.

If you’re already deep into the Microsoft ecosystem and/or you’re migrating from existing on premise Exchange servers, then we’d recommend moving to Office 365.

Now let’s take a look at the individual components of these productivity bundles and compare G Suite vs. Office 365 more closely.

Office 365 vs Google Apps Feature Comparison

Microsoft Office 365Google AppsVerdictEmailOutlook

ms-outlook-icon


50GB email included with most plans (not basic Business or ProPlus)Gmail

gmail-icon


Leading consumer email provider, 30GB or Unlimited depending on planBoth very mature email clients, many younger workers used to Gmail interface.File SharingSkyDrive

ms-skydrive-icon


1TB file sharing with most packages.Google Drive

google-drive-icon


30GB with basic and unlimited storage with Unlimited packageAbout the same these days, Dropbox still better on usability, but both of these are good enough.Word ProcessingWord

ms-word-icon


Full downloadable version in all but Essentials and Enterprise E1.Docs

google-docs-icon


Online version comes with both plans, great collaboration, opens and exports Word files.Docs wins on collaboration, Word for power features.SpreadsheetExcel

ms-excel-icon


Full downloadable version in all but Essentials and Enterprise E1.Sheets

google-sheets-icon


Online version comes with both plans, great collaboration, opens and exports Excel files.Excel for most power jobs, Sheets for integration with other servicesPresentationPowerpoint

ms-powerpoint-icon


Full downloadable version in all but Essentials and Enterprise E1.Slides

google-slides-icon


Online version comes with both plans, great collaboration, opens and exports PowerPoint files.PowerPoint is standard, though Apple's Keynote makes easier/prettier slides.Team Chat and ConferencingSkype for Business

skype-for-bus-icon


Solid support for Windows, improving for smartphone and Mac. Comes with all versions that include email (not included in Business and ProPlus)Hangouts

google-hangouts-icon


Ok browser support. Legacy UX and technical issues slowly improving.Both ok, have UX idiosyncrasies, Slack probably a better option for team chat.

Summary of product features in the Microsoft and Google productivity suites.

Pricing and Plans

Microsoft has a legacy of confusing price points and configurations, and Office 365 is no different. Microsoft offers at least 7 different pricing configurations for Office365. To summarize, there are really 3 main offerings:

  • Business Essentials: Email + Online apps only (closest to G Suite) – $5/user/month – (with annual commitment, which Google doesn’t require, price is $6/month for month to month)
  • Business: Downloadable Software + File Sharing – $8.25/user/month ($10/month with no commitment) – this is basically replacing the traditional software license for Office, with some cloud storage tossed in
  • Business Premium: Email + Downloadable Apps – $12.50/user/month ($15/month no commitment) – this is the combination of the above, which is what I’d consider the “real” Office 365.
  • Essentials is to compete with the G Suite offering and price point, Business is for legacy users that still haven’t migrated to cloud email, and Business Premium is really the first fully featured Office 365 offering.
  • Additional plans offer more admin, enterprise features, business intelligence, higher limits, etc., but still along the same broad groupings as outlined above. You can see the more advanced pricing plans here.
  • Downloadable full featured Office apps for computers, tablets, and phones is probably the single biggest differentiator for Office365, and it’s a bit buried in the confusing pricing plans and starts at the third tier.
  • You can view additional pricing details on the simple plans and additional plans.

Google for Work (pricing details)

  • G Suite Basic – $5/user/month
  • Email, 30GB/user, Hangouts for voice and video, online productivity software (Docs, Sheets, Slides)
  • G Suite Business – $10/user/month
  • Everything plus unlimited storage and enterprise level control and admin functionality.
  • FREE for Education and Nonprofits

Verdict: Google – Google offers much simpler and fairer pricing and easier signup and deployment. If a few users need Excel or Outlook, you can still use the stand alone licenses for Office 365 apps.

Email

G Suite offers email powered by Google’s Gmail infrastructure, the leading email provider. It comes with standard web access, which is likely to be familiar to most employees given how common gmail is for personal use. In addition to the powerful web view, it supports IMAP email clients like Apple’s Mail, 3rd party apps like Airmail and Spark, and even Microsoft Outlook (Windows Outlook support for Gmail is much better than the Mac Outlook).

Office 365 offers 50GB of email (for the plans that include email), available online through Outlook’s web portal, and if you have the plan with downloadable apps, also via Outlook’s app. If you’re an Outlook power user you’ll probably prefer this (though Google offers full Outlook integration for Windows and limited integration for Mac).

Verdict: Tied – both offer powerful back ends, tons of storage, and flexible usage options.

Productivity Software

Office is the standard bearer for productivity software suites, with Word, Excel and PowerPoint essentially defining their categories. If you are a power user on any of those products, you’ll likely want the downloadable versions of those applications, which is available on all but the Essentials Office 365 plan (which offers online versions only).

Google offers online versions of its productivity apps: Google Docs (like Word), Google Sheets (like Excel), and Google Slides (like PowerPoint). These versions offer basic functionality, but excel in real time collaboration because they’re mainly online only (all have limited offline support). Google has built out great collaboration tools so you can seamlessly work on documents with colleagues, add comments, and get notifications.

Verdict: Office 365 for apps (downloaded versions are much more powerful, especially if you’re doing a lot of Excel), G Suite for real time collaboration.

File sharing

G Suite offers Google Drive, and Office 365 comes with Microsoft OneDrive (most plans). Both products are very similar with core functionality of desktop syncing, sharing management, and online access. Google Drive’s default file sharing metaphor is a mess if you don’t set it up right, and OneDrive is still a bit rougher around the edges, but both get the job done.

Verdict: Tied – file sharing these days is table stakes, and while OneDrive and Google Drive are still not quite as elegant as Dropbox, they both have plenty of storage, desktop sync, and control.

Device and Platform Support

Both suites offer a rich array of apps for Android and iOS, and are all browser accessible from any computer. Office365 goes beyond with rich apps for Windows and Mac (for most plans).

Verdict: Tie – The platform wars of the 90s and early 2000s are largely behind us as the battle moves to the software layer. As a result, whether you prefer Android or iOS, Mac or Windows you’re covered. Google and Microsoft are actively supporting all platforms, with near functional parity across all of them.

3rd party applications and support

G Suite offers many more integrations with third party applications, and has an entire G Suite Marketplace which lists great third party software that you can easily install to augment your experience. Additionally, many products support Google authentication, creating an easy way to manage user onboarding for your employees and third party applications. (As a side note, this is a huge wasted opportunity for Microsoft especially given how much they dominated with Active Directory, but that’s a topic for another post).

Verdict: Google

Video Conferencing and Communication

Skype for Business is a catch all for chat, voice and video tools from Microsoft, which is included in most Office365 plans. The product works, and will soon be at feature parity between Mac and Windows after a long period of neglecting the Mac platform.

Google Hangouts has always offered more potential than it’s delivered, with a clunky UI and no native apps for Mac or Windows. The product is improving rapidly, but isn’t ready for prime time as your primary communications platform.

Alternatives: If you have more than basic collaboration needs, you’ll likely want to augment G Suite or Office 365 with dedicated tools. RingCentral for voice (and now meetings) is a powerful platform with much more control and flexibility. If you want dedicated video conferencing hardware, Highfive has you covered. And for team wide chat, Slack is probably your best bet.

Verdict: Skype for Business is far more mature than Google Hangouts if you’re going to rely on the built in communications options, but this point is moot if you go with one of a number of high quality third party communication options for phone or video conferencing.

Recommendation: G Suite for Work is best for most organizations

Picking one of the two standard business productivity suites is a big choice that impacts a lot of your core communication, collaboration and workflow. If you’re not on either of these platforms, you really should be. And if you’re picking between them, our recommendation for MOST companies is G Suite unless you’re deep in the Microsoft ecosystem.

The pricing is simpler and more fair, the collaboration tools are better, the platform is improving very very quickly, it has tons of extensibility to make your experience even better, and it’s the choice of most technology startups these days. G Suite is also easier to set up and manage without the help of an IT department or sales rep.

If you’re already deep into the Microsoft ecosystem and/or you’re migrating from existing on premise Exchange servers, then we’d recommend moving to Office 365.

But best of all both platforms are powerful and improving quickly.