The Hidden Dangers of Operating Without a Solid MSA
As a Managed Service Provider (MSP), your success hinges on trust and clear communication with your clients. At the heart of this relationship lies one essential document: the Managed Services Agreement (MSA).
An MSA is more than just a contract, it’s your shield against misaligned expectations, legal disputes, and financial risks.
Yet, many MSPs operate without one or rely on agreements that fail to address the complexities of their services. This leaves them exposed to a range of dangers that can harm their business, reputation, and bottom line.
That’s the importance of MSA for MSPs. Even MSPs with strong cybersecurity expertise can become legally vulnerable without proper contractual safeguards.
Let’s explore the hidden risks of operating without a solid MSA and how to safeguard your MSP.
1. Misaligned Expectations Lead to Disputes
MSAs form the foundation for preventing scope creep and setting clear expectations. Consider a situation where an MSP had provided after-hours support at no extra charge for several years.
When business changes required them to implement fees for this service, the absence of clear contractual terms resulted in a dispute that damaged both their client relationship and their bottom line.
The Danger:
Without an MSA, there’s no clear framework defining what services you will (and won’t) provide. This leads to misaligned expectations, scope creep, and dissatisfied clients. Risks of no MSA implementation can look like this.
The Impact:
- Clients may demand services you never intended to offer, leading to strained relationships.
- Disputes over unanticipated costs or unmet expectations can escalate into legal battles.
The Solution:
A well-crafted MSA establishes the scope of work, service levels, and exclusions, ensuring both you and your client are on the same page from day one.
2. Increased Liability Without Defined Responsibilities
A well-structured MSA should also include waivers of liability for specific events, ensuring MSPs aren’t held responsible for third-party issues outside their control.
The absence of clear liability limitations and vendor responsibility clauses left them exposed to damages far exceeding their annual revenue.
The Danger:
An unclear or missing MSA leaves your MSP exposed to liability for events outside your control, such as client negligence, vendor failures, or cyberattacks.
The Impact:
- You may be held responsible for damages that could have been avoided with clearly defined client responsibilities.
- Without limits on liability, your financial exposure could exceed your ability to pay.
The Solution:
A robust MSA includes risk-balancing terms such as indemnification clauses, liability caps, and clear client obligations (e.g., maintaining software licenses or following cybersecurity recommendations).
3. Compliance Risks Without Data Processing Terms
The regulatory landscape is evolving rapidly. In just the last six months, there have been new data privacy laws emerging in Colorado, Virginia, and Connecticut, with more states following suit. MSPs without proper data processing terms face increasing compliance risks.
The Danger:
In today’s regulatory environment, MSPs must deal with complex data privacy laws like GDPR, HIPAA, and CCPA. Without proper data processing terms in place, you risk violating these regulations.
The Impact:
- Non-compliance can result in fines, lawsuits, and reputational damage.
- Ambiguities in data responsibilities may expose your MSP to liability for client violations.
The Solution:
A solid MSA incorporates data processing agreements (DPAs), breach notification protocols, and clauses defining the roles and responsibilities of both parties in handling sensitive data.
4. Lack of Protections Against Third-Party Failures
Without proper contractual protections, MSPs became targets for lawsuits despite the root cause lying with their vendors.
The Danger:
MSPs often rely on third-party vendors for critical services. Without an MSA, there’s no protection against vendor failures that impact your clients.
The Impact:
- Clients may hold you accountable for outages or security breaches caused by your vendors.
- You could face financial losses due to vendor-related service disruptions.
The Solution:
A strong MSA benefits you by explicitly excluding liability for the acts or omissions of third-party providers. It also ensures you’re not left holding the bag for vendor-related failures.
5. Missed Opportunities for Price Adjustments
MSPs without flexible pricing terms in their MSAs often struggle to maintain profitability as their costs rise.
The Danger:
Operating without a solid MSA means you may lack the contractual flexibility to adjust pricing as costs change or services evolve.
The Impact:
- Rising vendor costs or inflation could erode your profitability.
- Inability to charge for additional services leads to financial strain.
The Solution:
Include pricing flexibility in your MSA, allowing you to adjust fees with reasonable notice or in response to changes in third-party costs.
How Monjur Can Help
Operating without a solid MSA risks your business. At Monjur, we specialize in creating dynamic, legally sound contracts specifically designed for the unique needs of MSPs.
The traditional approach of paying large upfront fees for static contracts is becoming obsolete. Our Contracts-as-a-Service (CaaS) solution ensures your agreements evolve with your business, keeping you protected from these hidden dangers.
Don’t leave your business exposed. Contact us today to learn how Monjur can help safeguard your MSP with a solid MSA.
