SLA (Service-Level Agreement)

Definition

The promised response and uptime a service contract holds the provider to.

Why It Matters

Price and promise travel together, so a contract that pays 20% more with a four-hour response promise can be the worst account in the book once the staffing to honor it is costed. In diligence, read the SLAs against the current roster rather than against the sales copy: penalty credits, after-hours coverage, and the accounts whose promises only one employee can keep are all margin already spent. The tightest promises are usually attached to the customers everyone is proudest of.

In numbers: An SLA promising 1-hour response around the clock needs paid on-call coverage that can cost $60,000 a year, which repriced one flagship account from the best in the book to roughly break-even.