Master Service Agreement (MSA) vs. SLA: What’s the difference?

When it comes to SaaS and spend management, two key documents play a vital role in ensuring smooth collaboration and successful outcomes: Service Level Agreements (SLAs) and Master Service Agreements (MSAs). While there is a frequent misconception that these agreements can be used interchangeably, understanding their distinct purposes is crucial for both SaaS vendors and buyers.?

By nature, strategic spend management is an ongoing process. Selecting the right agreement will help signing parties ensure optimal vendor relationships, simplify future agreements, and speed up negotiations.?

What is a Service Level Agreement (SLA)?

An SLA acts as a formal agreement between a service provider (often an IT department or vendor) and a client (an internal team or external customer). It outlines the specific details of the SaaS application, the expected quality and availability of the application, and the procedures for handling service disruptions. In essence, an SLA is a roadmap that sets clear benchmarks for performance and service expectations.

What are the key components of an SLA?

• Service definition: A comprehensive description of the SaaS application, encompassing its functionalities, features, and limitations.
• Performance metrics: Measurable indicators that track the effectiveness of an application. Common metrics include uptime percentages, response times for support tickets, and resolution times for service issues.
• Service credits: Repercussions for vendors when performance falls below agreed-upon standards. Service credits can take the form of discounts, fee reductions, or extended service periods.
• Escalation procedures: Defined steps to be followed when service issues arise, ensuring prompt and efficient resolution.

What’s the difference between an internal vs. external SLA?

It’s important to distinguish between internal and external SLAs. Internal SLAs govern the relationship between an IT department and internal customers within an organization. These agreements often function more as service guidelines, outlining expected response and resolution times for internal service requests.?

External SLAs, on the other hand, are binding contracts between vendors and external clients. Failure to meet service level expectations in external SLAs can have more significant consequences, potentially leading to contract termination.?

What is a Master Service Agreement (MSA)?

An MSA serves as a broader framework agreement established between a vendor and a client. It lays the groundwork for a long-term business relationship, outlining the general terms and conditions that govern all current and future projects and services provided by the vendor.

Continue reading the blog here to learn:

• What the key components of an MSA are
• The benefits of utilizing MSAs
• The key differences between SLAs and MSAs

Or check out our ebook - Master Service Agreement Checklist: 21 key things to consider.