A service level agreement or SLA is a document that defines the relationship between the client and the service provider. A good SLA consists of all the services to be provided by the provider, how they will be delivered, how they will be managed and measured and by whom, what happens if the services don’t meet the agreed upon performance, and how the SLA will change over time. An effective SLA should cover a list of all services to be delivered, how performance will be managed and tracked, how important key performance indicators would be reported and how issues will be resolved.
It would also include a clause that the service provider would ensure security of confidential data especially if data is shared over the internet. A good SLA also covers Intellectual Property Rights and information on how Confidential Information would be handled. Lastly, the SLA covers the terms of termination of the contract which could be the result on violation of the terms set in the SLA.
Amongst the issues highlighted above, one of the most important is ensuring protection of Intellectual Property and Confidential Information. Outsourcing obviously requires sharing of proprietary knowledge, the nature and importance of which differs in different industries and business. Trade secrets, trademarks, industrial designs, patents, copyrights, etc. are different Intellectual Property assets that would be required to be shared with the service provider in order for them to provide the services efficiently.
Trademarks, copyrights and confidentiality become more important in an international environment and require that the service providers be legally bound to ensure protection of private information. Therefore, a good SLA should cover instructions on what constitutes Intellectual Property (what can and cannot be shared publicly), how to treat any confidential information and what happens to confidential records on termination of the contract. An example of a clause on confidential information: Commit to give access to appropriate information as requested by The Contractor.
Each party agrees that it shall not disclose to any third party any information confidential to the other including, without limitation, information concerning trade secrets, methods, processes or procedures or any other confidential business or technical information of the other party (“Confidential Information”) which it learns during the course of its performance of this Agreement without the written consent of the other party except to the extent that any such Confidential Information (i) is in the public domain (ii) is independently developed by the other party (iii) is already in the possession of such party prior to disclosure (iv) is rightfully received from a third party not under a confidential obligation to the first party, or (v) is legally required to be disclosed by the receiving party (Dockland, 2007).
The laws governing each type of Intellectual Property differ from country to country. In order to avoid confusion, an effective SLA should also define the courts of which jurisdiction will have the final say in determining liability for legal actions from outsourcing issues (Workman, 2008). Non-competition clause enforcement may also be required to ensure that employees leaving the company do not reveal any trade secrets. Such employees are restricted from working with competition companies for a year or so to ensure that the knowledge they had gained during their tenure at the service provider has outdated or is publicly available by that time.