What Is an Internal Service Agreement?

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An internal service agreement, also known as an internal service level agreement or an internal support agreement, explains the services that one department will provide to other departments in an organization. Since this type of service agreement applies to departments within a business, it is not a legally enforceable contract. Information technology (IT) departments often have internal service agreements with other departments.

Significance

The purpose of an internal service agreement is to reduce the internal demands on the department that releases the document. The agreement reminds managers of other departments that the service department must assist many departments within the organization and it has limited resources. The internal service agreement protects the service department if it needs to refuse a request for help from another manager and that manager complains to company executives.

Time Frame

An internal service agreement provides guidelines that explain how long it will take for the department to provide a requested service. For example, an IT department may perform a simple request -- such as changing a user's password -- in one day. They may inform another department, however, that installing new software on every computer in that area may take up to a month.

Severity

An internal service agreement may define problems based on their level of severity. The IT department may fix some problems quickly, such as server crashes, because a server crash prevents every employee on the system from doing their job. The agreement may also list different staff members to contact, depending on the severity of the problem. If one department is more important to business operations, a problem that affects that department may be classified as more severe under the agreement.

Rewards and Penalties

An external service agreement can establish penalties. For example, if an internet service provider (ISP) can't provide a connection for several days or a web hosting company's servers go down and customers can't access their websites, a business can lose money and clients. According to Wofford College, fines or penalties attached to internal service agreements may prevent that department from performing its job. Therefore it is more effective to use a performance reward system. For example, if the department completes every service request on time for a month, each staff member receives a bonus.

Utility

A contract for services with a customer includes minimum service standards, so an external service agreement is mandatory. An internal service agreement, however, is optional. These agreements are most useful for large organizations with many employees, especially when employees don't normally work on the same projects and are unfamiliar with the capabilities of other departments.

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