Service level agreements are contract documents that specifies the rights and obligations of the two parties that are involved in the contract for work i.e. the client and the service provider. The SLA details the levels of services that the vendor will provide the client under the agreement and what payments they would receive for the same.

In addition, service level agreements also specifies the incentives, if any and the penalties that the service provider will have to incur if it fails to provide the expected qualities of deliverables. This ensures that the clients get compensated for the poor performance

Importance of Service Level Agreements
Service level agreements are an integral part of the business projects. It is a singular document that contains all the terms and conditions of the agreements that are agreed on by both the parties. And service level agreements offer an easy route for things and conflict resolution if in case there is any issue between the two parties. It is advisable to get your service level agreements reviewed by a legal counsel so that all the terms mentioned in it can be reviewed legally.

Creating a Service Level Agreement
Generally, service providers have a standard service level agreements that they offer as part of the complete work agreement. Use that as a starting point and get you in-house counsel and legal counsels to review it. They would make certain changes and adjustments that are favorable to your side. They may also add certain provisions that will focus on your priorities.

Basic Components of a Service Level Agreement
The size of service level agreements may differ according to the nature and complexity of the project. It can be a few pages or even a hundred pages long. The basic components of a service level agreement are:
Objective of the outsourcing project
Roles and responsibilities of the service provider as well as the client
Acceptable performance parameters and relevant metrics.
Expected duration of the project.
Description of applications and services that are involved under the agreement.
Procedure to monitor and manage the service levels.
Schedule for payment of incentives and penalties.
Procedures for conflict resolution.

Indemnification
Indemnification is the process where the service provider is liable to pay the clients for any third party litigation costs that results from a breach of warranties. This works in favor of the clients as they get a compensatory amount either in cash or in terms of additional services for the expenses incurred by the breach. Make sure this clause is mentioned explicitly in the service level agreements and if not make you legal counsel add it.

Effect of Ownership Change
Ownership changes happen when the service provider is acquired by or merged with some other company. If the new company plans to carry on the latter's business, customers usually have an expectation that the SLA will remain the same as well. However, that is often not the case. Clients will have to renegotiate the terms of the service level agreement with the new management.

Maneet Puri is the director of LeXolution IT Services, a premier IT outsourcing company based in India. His company provides a range of web services like virtual assistance, internet research and data processing services.