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Why enter into a “Service Level Agreement?”
Published: 2 May 2009

Why enter into a Service Level Agreement?


Setting, tracking and managing Service Levels is an important aspect of customer relations if you are a vendor and outsourcing management if you are a consumer of technology services. Service Levels should be negotiated up front as part of the outsourcing contract and consistently utilised as one of the primary tools of outsourcing governance.

Failure to adequately define and manage Service Levels (more specific to ICT services) may result in:

- inefficient organisations; lack of productivity;

- wasted expenditure including wasted costs on software or hardware purchased;

- costly and time consuming litigation to terminate an agreement;

- failure to achieve the organisation’s IT goals and objectives.


A well drafted Service Level Agreement:

- identifies and defines the requirements of the client,

- provides a framework for understanding scope of work;

- simplifies complex issues;

- reduces areas of conflict;

- encourages efficient escalation and resolution of disputes;

- provides for realistic expectations and parameters; and

- establishes the penalties and remedies for failure to meet Service Levels;

In our experience, the following critical aspects  of outsourcing management must be addressed in Service Level Agreements:

- performance, tracking and reporting;

- legal compliance;

- third party dependencies;

- subcontractor relationships that Service Provider may enter into and the terms thereof;

- exclusive relationship with Service Provider and the circumstances under which a client may engage other service providers;

- Service Provider’s duties and responsibilities;

- security and information security;

- intellectual property rights and Confidential Information; and

- conditions for termination of the Contract.

Please contact for more information on Service Level Agreements or related Chetty Law services.

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