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If you are buying IT services for your business, you want to ensure that these services will perform to a certain standard. This is especially important if your business cannot function properly without them. Therefore, you should ask prospective IT service providers about their service levels. A service level is a guarantee about the quality and consistency of their services. These promises could apply to any IT service, such as:

  • software development;
  • software as a service; 
  • web hosting; or 
  • service providers that manage your internal IT systems. 

As a customer, it is beneficial for you to receive these service level guarantees. However, you must make sure that your service level agreement allows you to benefit from the promises that your IT provider makes. This article explains: 

  • what service levels are;
  • how they can benefit you; and 
  • what to look out for to ensure that they benefit you.

What Are Service Levels?

A service level is a promise made by your IT service provider to deliver a certain level of service. Your IT provider will likely offer service levels to show you that they operate to a high standard. It also helps to prove that you can trust them with your business. 

Common examples include:

  • their service uptime (i.e. how consistently their service operates);
  • how quickly they respond to your complaints; and
  • how quickly they can resolve your issues.

Each service level should be accompanied by defined criteria as to how your IT provider will measure their performance. These indicators will depend on each provider and the type of service level you are purchasing.

For example, the host of your website might promise a high uptime in a provision such as this: “We will use commercially reasonable efforts to make your website available 99.99% of the time during each calendar month”. In this case, uptime is the service level and the percentage of time the service is available is the key performance indicator.

The type of service you are receiving from the service provider will determine which service level is most relevant to you. If you are buying access to software as a service, you will likely care about the software being available for you to use at your request. Accordingly, you should see a guarantee from the service provider about the availability of the service.

For instance, they might promise a certain level of uptime in a provision like this: “The service provider guarantees that the software as a service will be available 24 hours a day, 7 days a week, 52 weeks a year”.

However, most IT service providers cannot confirm a 100% uptime. This is because they must account for unforeseen situations that may arise and cause their service to be temporarily unavailable. Therefore, they tend to hedge their promises with a small chance of failure. 

For example, they could promise that: “The service provider guarantees the service will be available 99.9% of the time”.

If the service provider is providing IT support to your business, then the service level most important to you is how quickly they resolve your issues. In these circumstances, you should draft the service level promise differently. 

For example, it may read: “The service provider will respond to and resolve all issues submitted via the support platform within 24 hours of submission”.

Why Are Service Levels Beneficial to Me?

Service levels are beneficial because they provide you with an indication of the level of service that you can expect. This will be helpful when deciding on an IT service provider, as you can seek a business that will provide you with your desired standard of performance.

It also shows that the service provider has confidence in their service. If they guarantee that their service will be available 99.99% of the time, or that they will resolve any issue you submit within 24 hours, it demonstrates that their service is of high quality.

Finally, it gives you a way to hold the service provider accountable. This means that if they fail to fulfil the promises that they made under your service level agreement, you can seek some compensation.

What to Look For in Your Service Level Agreement

If you receive a service agreement you should check for the service levels that the provider is willing to offer. You should carefully review these promises to make sure that they will meet your needs. If there are no service levels, you should ask to have these included. It is in your best interests to have your service provider guarantee some level of service, so that you ensure your business can function properly.

What Are the Service Levels?

Notably, you should check whether the service levels: 

  • are the kind of service level you want; and 
  • meet the standard of performance that you want.

For example, you should assess whether you are satisfied with the: 

  • availability; 
  • response times; or 
  • resolution times included in the service levels.

You should also consider whether they give you a real guarantee which you can rely on or whether they use fluffy language which refers to service levels but does not unequivocally promise you an availability or a resolution timeframe.

For instance, you may want to request a service level with more certainty if they only offer you a provision like this: “Within our available resources, we will attempt to ensure that our software as a service is available as often as possible”. You will notice that this provision does not actually make any firm guarantee.

What Exclusions Are Included?

You should also determine whether the service levels include any exclusions or limitations. These are provisions that shift responsibility for the provider’s failure to meet the standard of performance that they promised. 

It may often be reasonable to include some exceptions, such as where:

  • failure is caused by a natural disaster; or
  • they have scheduled maintenance and warned you of the potential downtime.

For example, it may be acceptable that an IT provider cannot meet a service level because of a fire in the hosting centre. 

However, you should seek to amend any provision that allows the service provider to exclude responsibility for a failure caused or contributed to by subcontractors. The service provider should accept responsibility for the subcontractors they choose to work with and ask those subcontractors to provide their services in accordance with the service levels that they have promised to you. 

Are You Entitled to Service Credits?

Finally, you will need to work out what rights you have if the service provider fails to meet the service level. To ensure you benefit from the service levels, you must:

  • determine what forms of compensation you are entitled to; and 
  • when you can access them.

Ideally, the services agreement will include service credits offered by the service provider. These are a credit that you can claim against future payments you make to the service provider. 

For example, if their hosting service is offline for 24 hours, they might entitle you to a 10% discount on the fees for next month.

If you are entitled to service credits, these should be applied automatically. This makes the process much easier for you, rather than requiring you to submit a claim for them every time an issue arises. 

You should also check the service credit amount and look out for any threshold which may preclude you from receiving credits for more minor breaches.

For instance, some providers might place a cap that prevents you from accruing service credits worth more than 20% of the next month’s fees. They could also mandate that minor issues must occur three or more times in a month before you are entitled to any remedy.

Are You Entitled to Multiple Forms of Compensation?

Having a good service credit regime included in the service agreement is a win for you as a customer. However, you should consider some other remedies that you may wish to pursue if the consequences of their failure are more severe. These include the right to:

This may be useful if the service provider severely fails to deliver in line with the service levels, causing serious detriment to your business. 

For example, if you run an e-commerce website and your web host experiences downtime for one week, you are going to lose a lot of sales. Therefore, you might seek monetary compensation for your loss in profits. If this issue continues, you will likely want to terminate the contract and seek another provider.

You must ensure that your service agreement makes it clear that service credits are not your sole and exclusive remedy. It may be helpful to detail the specific circumstances that will give you a right to take other legal action.

Key Takeaways

If you are buying IT services, you will want to make sure that they are:

  • available as you require; and
  • delivered in a timely manner.

. Service levels are a great way to set these expectations with the service provider. However, you need to be careful about how these are drafted to make sure that:

  • the agreement offers the type of service level you want;
  • there are no unreasonable exclusions; and 
  • you can receive appropriate remedies if they fail to fulfil their promises.

If you would like help reviewing your service agreement to check that you meet your service level requirements, contact LegalVision’s IT lawyers on 1300 544 755 or fill out the form on this page. 


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