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What exactly is an SLO? How does it differ from SLA? From a performance testing point of view, how should these terms be used?

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Service-level agreement

A service-level agreement is an agreement between two or more parties, where one is the customer and the others are service providers. This can be a legally binding formal or an informal "contract" (for example, internal department relationships).

The agreement may involve separate organizations, or different teams within one organization

Contracts between the service provider and other third parties are often (incorrectly) called SLAs – because the level of service has been set by the (principal) customer, there can be no "agreement" between third parties; these agreements are simply "contracts." Operational-level agreements or OLAs, however, may be used by internal groups to support SLAs. If some aspect of a service has not been agreed with the customer, it is not an "SLA".

Customer Based SLA - An agreement with an individual customer group, covering all the services they use. For example, an SLA between a supplier (IT service provider) and the finance department of a large organization for the services such as finance system, payroll system, billing system, procurement/purchase system, etc.

Service Based SLA - An agreement for all customers using the services being delivered by the service provider

Multilevel SLA - The SLA is split into the different levels, each addressing different set of customers for the same services, in the same SLA.

  1. Corporate-level SLA

  2. Customer-level SLA

  3. Service-level SLA

Service-level objectives (SLO)

A service level objective (SLO) is a key element of a service level agreement (SLA) between a service provider and a customer. SLOs are agreed as a means of measuring the performance of the Service Provider and are outlined as a way of avoiding disputes between the two parties based on misunderstanding.

There is often confusion in the use of SLA and SLO. The SLA is the entire agreement that specifies what service is to be provided, how it is supported, times, locations, costs, performance, and responsibilities of the parties involved. SLOs are specific measurable characteristics of the SLA such as availability, throughput, frequency, response time, or quality.

from Service Level Objective, Wikipedia

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A service level objective (SLO) is a key element of a service level agreement (SLA) between a service provider and a customer. SLOs are agreed as a means of measuring the performance of the Service Provider and are outlined as a way of avoiding disputes between the two parties based on misunderstanding.

Service level agreement(SLA)

A written agreement documenting the required levels of service. The SLA is agreed on by the IT service provider and the business, or the IT service provider and a third-party provider. A service-level agreement (SLA) is a contractual agreement outlining a specific service commitment made between contract parties -- a service provider and its customer

Service-level objectives (SLO)

Each SLO corresponds with a single performance characteristic relevant to the delivery of an overall service. Some examples of SLOs would include: system availability, help desk incident resolution time and application response time. A service level objective (SLO) is a key element of a service level agreement (SLA) between a service provider and a customer.

SLOs are agreed as a means of measuring the performance of the Service Provider SLOs are outlined as a way of avoiding disputes between the two parties based on misunderstanding The SLA is the entire agreement that specifies what service is to be provided SLOs are specific measurable characteristics of the SLA such as availability, throughput, frequency, response time, or quality. The term SLO is deprecated in ITIL V3 to Service Level Target

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In one sentence, SLO is part of SLA. SLA is a legal contract while SLO has some specific definitions regarding performance, which can be used to guide performance testings.This topic is actually well discussed in the links below:

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Now lets start understanding the difference between SLA and SLO in a very simple language:

SLA (Service Level Agreement): It's like your school rule book. The rule book will tell you, "Students must attend 75% of classes to pass," "The school bus will arrive at each stop within 5 minutes of the scheduled time," etc. These are promises the school makes to you and your parents. If they don't keep these promises, there might be a penalty like a formal complaint to the school board.

SLO (Service Level Objective): Now, within that rule book, teachers also have some goals. For example, "We aim to complete the syllabus 2 weeks before exams." This is not a hard rule, but a target or goal they aim to achieve. No one is going to court if they miss it by a day, but they strive for it.

Now lets understand at industry level

Service Level Agreement (SLA) In companies a Service Level Agreement is a formal, legal contract between a service provider and the client. It sets the metrics by which the service is measured, along with remedies or penalties should agreed-on service levels not be achieved. SLAs cover things like:

Availability: The system should be up 99.9% of the time. Response Time: Any API call should return within 300 milliseconds. Support: If a problem arises, the support team will respond within 1/2/3/4 hours (as Per the agreement).

Example: A payment processing service which is provided by 3rd party to the organisation, an SLA might guarantee that a server will have 99.99% uptime. If this is violated, the service provider might give the customer some kind of compensation, like credits for future services.

Service Level Objective (SLO) SLO is more of an internal goal within the organization, often not part of the formal, legal contract. These are specific, measurable objectives the service aims to achieve. SLOs help in:

Prioritizing work: What to focus on for maximum impact? Resource Allocation: Where should we put more engineers or budget? Example: In a Software-as-a-Service company, SLO might be to make sure the software loads within 2 seconds for 95% of the users. It's not legally binding, but it's a performance standard the team aims for.

From a Performance Testing Point of View When you're in performance testing, these terms become crucial benchmarks.

SLA: If you're told that the API should respond within 300 milliseconds, then your test should simulate different scenarios to check if the system can adhere to this SLA under various loads and conditions. Violating SLA might result in penalties for your company.

SLO: For example, if your SLO is to load software within 2 seconds for 95% of the users, you'll run performance tests to check if this objective is met under different conditions like high traffic, different geographies, etc. It helps you identify areas for improvement.

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