SLA, SLO and SLI Explained

In modern manufacturing IT, SLI (Service Level Indicator) measures actual system performance as a concrete metric, SLO (Service Level Objective) defines the internal target for that metric, and SLA (Service Level Agreement) is the contractual commitment to a customer or user that a specific performance level will be met. These three terms describe a clear hierarchy: without measurement, there is no goal; without a goal, there is no meaningful contract.

Understanding the Hierarchy: Why Sequence Matters

The most common mistake in industrial IT: companies negotiate SLAs with software providers without ever defining which SLIs they actually measure or which SLOs apply internally. The result is a contract whose compliance no one can validly verify.

The correct logic flows from the bottom up:

1. Define what is measured – this is the SLI.
2. Set the desired target value – this is the SLO.
3. Contractually guarantee the minimum – this is the SLA.

An SLA not anchored in a defined SLO is a document without an operational foundation.

Service Level Indicator (SLI): The Measurement Level

An SLI is a precise, quantifiable metric that describes the state or performance of a system at a specific time. It is the raw material for all further service-level evaluations.

Typical SLIs in Production and MES Environments:

Service Level Objective (SLO): The Target Level

An SLO is an internally defined performance goal for one or more SLIs, typically over a fixed measurement period. A classic example: "The MES shall be available 99.9% of the time on a monthly average."

SLOs align operations, IT, and business departments toward a common, measurable goal. They are not a promise to the outside world—they are the internal steering mechanism.

Practical Warning: The SLO must always be stricter than the SLA. If the SLA guarantees 99.5% availability, the internal SLO should be 99.7% or higher. This acts as a buffer to identify issues before a breach of contract occurs.

The "Error Budget" Concept

Originating from the Google SRE model and now entering industrial IT, the Error Budget makes risk management operational. If your SLO defines 99.9% availability, you have an Error Budget of 0.1% (approx. 43 minutes of tolerated downtime per month). Once this budget is exhausted, risky deployments are halted until it regenerates.

Service Level Agreement (SLA): The Contractual Level

An SLA is a legally binding agreement between a provider and a client. It defines which SLOs are guaranteed, how compliance is measured, the consequences of falling short (penalties), and escalation paths.

The "Single-Incident" Trap: Most SLAs define availability as a yearly or monthly average. 99.9% availability sounds solid but allows up to 8.7 hours of downtime per year. If these 8.7 hours occur in a single event, but your production requires an RTO (Recovery Time Objective) of 2 hours, you are contractually under-protected. Always negotiate the Maximum Single-Incident Downtime.

Summary of Differences

FAQ: SLA, SLO, and SLI in Manufacturing

• Do I need SLOs without an external SLA?Yes. SLOs are primarily internal steering instruments. Without them, you cannot systematically evaluate stability or react to performance degradation before it becomes a production risk.
• Which SLIs are essential for an MES?At a minimum: Availability, Latency, and Error Rate. For real-time environments, Data Freshness is becoming increasingly critical.
• Who is responsible for SLOs?In converged IT/OT environments, it is a joint responsibility. IT Ops manages the technical side, but the business department must define which downtime or latency is operationally tolerable.
• What happens if an SLA is breached?Usually, this results in "Service Credits" (refunds). However, credits rarely cover the actual cost of a production standstill. They are a compliance mechanism, not full damage compensation.
• How do SLA/SLO/SLI relate to RPO and RTO?RPO and RTO are specific SLOs for disaster recovery. RTO is the SLO for restoration time; RPO is the SLO for maximum data loss. A complete service model contains both.

Strategic Value

A comprehensive SLI/SLO/SLA model makes the operational quality of digital production systems objective and manageable. As manufacturers become increasingly dependent on cloud-MES and digital platforms, they must manage these dependencies with the same rigor they use for machine capacity and quality KPIs: through measurable targets and clear accountability.