Differences Between SLA Vs. KPI And Their Types

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SLA and KPI are terms often used interchangeably when discussing the quality of your business administration. However, they are not the same thing, and understanding the difference between them is critical to ensuring that your software meets your goals. So let's put this to the test, SLA vs. KPI - What's the difference?

In this essay, we'll discuss the key definitions of SLA and KPI, the differences between them, and the pros and cons of SLA and KPI. Ultimately, we will also reveal comprehensive software development tools and software testing services for all your business needs. Let's get started!

Also Read: Software Testing Services

What is a Service Level Agreement (SLA)?

An SLA is a contract between a business and its customers, outlining the level of service that the business will provide and the service levels the business will strive to meet. It also details the penalties incurred when the business fails to deliver the level of service it agreed to provide.

An SLA can also be referred to as a performance agreement or a service-level commitment. The point of an SLA is to ensure that your customers are receiving the service they pay for.

When comparing SLA vs. KPI, three different categories of service level agreements are frequently distinguished. They consist of:

1. Service-Based

On a service-based service level agreement, all customers can anticipate the same terms of service. In this instance, everyone interacting with a service provider is given comparable conditions. This would include the SLA you have with your mobile service provider.

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2. Customer-Based

A customer-based service level agreement is more specifically tailored. This SLA provides a comprehensive overview of the relationship between a vendor and a customer; it is probably not a one-size-fits-all contract.

3. Multi-Level

This type of SLA agreement is divided into levels to cater to various customer groups using the same service.

Generally, most SLAs consist of:

  • A description of what the service provider will perform 
  • Service's quality and timing 
  • How performance will be tracked 
  • How issues should be resolved 
  • Penalties for non-compliance 
  • When the SLA may be waived

Relatable Read: Checklist of Common SLA Metrics

What is a Key Performance Indicator (KPI)?

A KPI is a performance measurement that helps an organization measure the effectiveness of its strategy. When we compare the terms SLA vs. KPI, KPI measurements are typically used to improve the performance of an organization, such as the number of sales calls that were made or the number of invoices that were issued.

KPI measurements are also used to measure the performance of an individual, such as the number of new clients that were acquired or the number of hours that were spent on a project.

A KPI can be used as a compass to highlight business areas that may deviate from a predetermined course. Similar to how a doctor must learn about a patient's vital statistics before recommending a course of treatment, a leadership team can use KPIs as important data to make business decisions.

Read Through: Benefits of API Testing for Business

Differences Between SLA Vs. KPI
Differences Between SLA Vs. KPI

Difference Between SLA vs. KPI

An SLA is a contractual agreement between two parties, whereas a KPI is a measurement used to improve an organization's performance. The main difference between SLAs and KPIs is that SLAs are used to ensure that customers receive the service they pay for, whereas KPIs are used to improve the performance of an organization.

However, the purpose of both SLA and KPI is to improve the quality of an organization's service.

In other words, KPIs offer data on the effectiveness and success of achieving organizational objectives or expectations. While KPIs help ensures that specific performance improvements and results are met adequately or exceedingly, SLAs are used to ensure that service level metrics do not fall below certain criteria.

Whether internal or external, the engaged service provider is expected to take appropriate action to improve service performance. 

Now that we know the difference between SLA vs. KPI, let's have a look at their respective pros and cons: 

Pros and Cons of SLA

Pros of SLA

1. It Makes Things Transparent

Transparency in the company relationship is ensured by having liabilities spelled out in contracts and signed. This directly affects the projected goals and quality indicators outlined in the original agreement.

2. It Benefits Businesses Of All Sizes

The SLA is crucial to guarantee the quality of results delivered to all clients, especially small and medium-sized businesses. Establishing these agreements, for instance, can boost the confidence of a microentrepreneur who requires IT support but has previously encountered issues with stability, availability, and support.

3. Greater Legitimacy

Giving guarantees to clients who sign contracts is crucial in the IT industry's development. Contracting parties and service providers' interactions develop more credibility, going beyond just producing positive outcomes.

Cons of SLA

  • SLA requires the business to set aside cash to fund guaranteed service levels. A cost is associated with this, ultimately representing additional overhead for businesses.
  • The SLA is so narrowly tailored to creating customer confidence that it may be impossible for customers to know or asses if their needs are being met. This can cause frustration and a decrease in client loyalty.

Pros and Cons of KPI

Pros of KPI

1. Reducing Learning Gaps

You can identify and close learning gaps with the aid of KPIs. If you're having trouble achieving your goals or objectives, it might be a sign that your staff needs more instruction and perhaps need to analyse SLA vs. KPI.

2. Results and Outcomes Measured

You can gauge outcomes and results using KPIs. A good KPI must, by definition, be quantifiable and trackable. You can't make changes or improvements without a way to track your progress toward your goals.

Cons of KPI

  • KPIs are helpful, but avoid trying to take on too many at once. Start with one or two KPIs if you've never identified and implemented them. 
  • Teams may become overly preoccupied with the short-term perspective, and the longer-term vision may suffer due to KPIs being short-term objectives, frequently covering just one month or quarter. 
  • Because KPIs are designed so precisely, employees may feel creatively stifled, slowing innovation and the generation of new ideas.

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SLA vs. KPI are two terms used in performance management to measure the quality of a product or service. They are important to any company as they provide insight into how well a company performs and where improvements can be made. In this article, we've discussed what a service level agreement is, what is a key performance indicator, the key differences between these two terms, and their pros and cons, respectively.

Also Read: Best Performance Testing Tools

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