What to include in your managed services customer agreement?
As a managed service provider, how do you approach writing a complicated document like a Managed Services Agreement?
Are there resources out there to refer to so you don’t have to start from scratch?
Who, what, and where should it cover, specifically?
The contract is a key component of a managed service provider’s relationship with clients. There may be serious reputational and legal consequences if you do not include comprehensive information that clearly details the responsibilities of both parties and reduces your risk.
Fortunately, we have considerable experience working on MSP contracts with clients and are familiar with all of the factors you need to consider before writing your contract.
Think of the managed service provider contract as a way to set expectations for the relationship with your client, establishing the boundaries and ground rules so that future disputes and litigation can be avoided.
Also, as you grow larger, so does your level of risk and liability. You need to cover your back and a well-written contract helps you do that.
It is inadvisable to use a one-size-fits-all boilerplate contract. However, clearly you do not want to have to write a new contract from scratch every time you provide services to a new client.
A working template that covers all basic provisions for every client and that can be adjusted for the individual needs of specific clients is the best way to go.
What general area do managed services contracts need to cover?
An MSP contract should be written to cover the following general areas:
- The services you will be providing and for whom
- Your service-level agreement (SLA)
- A termination clause
- Limitation of liability
- Definition of support tiers
- Support response times and escalation process
- Excess fees for services not covered in a flat-fee agreement
- Any other major exclusions
Specific points to cover in MSP customer contracts
Let’s look at these general areas in more detail so that you can define the “nuts and bolts” of your MSP contract.
From our experience with software vendors, including the following information will provide a solid base for creating an excellent template:
Client terms and conditions
This is a basic requirement and should include the following information:
- Business name and primary contact
- Primary and after-hours contact information
- Client locations covered
- Payment terms
- Length of contract
- Start and end date of the contract
- Terms of renewal
Note that with today’s increasingly mobile workforce and encouragement to work from home, the terms and conditions should cover the precise locations that the agreement applies to – and where it does not.
What if the client expects on-site support for an employee who lives two hours away?
If there are third-party vendors involved in the contract, this section may become more complicated as each relationship will need to be outlined.
Description of services provided and pricing
- What services are covered in the agreement?
- Which systems are you responsible for supporting (and which are the client’s responsibility?)
- Does it include only remote services or on-site services too? If so, how are they charged?
- Are out-of-hours services included or charged extra? What are the normal operating hours according to your service level agreement?
- What are your SLAs for response time, resolution, etc.?
- Is there scope for the client to add services to cover other areas not included in the agreement (e.g., could you upsell the client to a managed service package)?
- How often and how much will the client pay you?
- Are modifications to the agreement allowed?
- How can customers submit a service request to support?
- What happens when a ticket is raised?
- How does the client escalate an issue?
Description of licensing agreement
You should provide a detailed explanation of the licensing agreement – whether it is provided as Software-as-a-Service (SaaS) or another arrangement.
Clarify how the agreement is terminated
- How can you, as the provider, terminate the agreement?
- How can the client terminate the agreement?
- Who owns the data if and when the agreement is terminated?
Include a “limitation of liability” clause
Under what circumstances can the client sue you for negligence? You need to cover your back with this as mistakes can be expensive.
An attorney from Scott & Scott can provide guidance on this and will include wording that covers warranties, disclaimers, indemnification, remedies, and so on.
Detail the insurance coverage provided
- How much cybersecurity insurance is the client covered for with the agreement?
- What is covered and not covered with the policy?
- What happens if a client is infected with ransomware?
Outline the company’s commitment to providing reasonable confidentiality for data and business practices. Also include details about non-disclosure.
Your employees are a major asset in your business, and you should not leave the door open for a client to poach them. Include a non-hire clause that deters this behavior.
Detail what constitutes illegal behavior
Your MSP should spell out what constitutes illegal behavior and how you will handle it if discovered.
Do you have an obligation to inform the client first before informing the police or not?
Definition of terms
Ideally, your MSP contract will contain no confusing jargon, but it is a legal contract, so there may be terms used that the client is not familiar with.
Include a glossary of definitions so that the document is intelligible for the average person. Your clients will thank you for it.
The main benefits of having your MSP contract reviewed by experienced attorneys
Now you know what to include in your managed service provider contract, you’re ready to go.
Here is a quick reminder of the main benefits of developing an MSP contract template that can be used every time you bring on a new client:
- It sets the ground rules between you and the client at the start of the relationship
- It helps establish roles and responsibilities within the relationship
- It establishes protocols for settling disputes and limits your liability
Contact a managed service provider (MSP) contract expert at Scott & Scott today
If you get your MSP contract right, it helps you build strong and lasting relationships with clients and positions you as a trusted provider for their business.
If you get it wrong, you can end up in litigation.
So, a little time spent upfront dotting the i’s and crossing the t’s with an attorney from Scott & Scott can limit your risks and potentially save a lot of pain further down the road.