Managed IT Services

Mastering MSP Contracts: A Guide to Ensuring Success

Post by
Net Friends
Mastering MSP Contracts:  Guide to Ensuring Success blog thumbnail
Securing a partnership with a Managed Service Provider (MSP) starts with a robust contract that is more than just fine print—it is your peace of mind.

It is about crafting an agreement that not only shields your interests, but also lays the groundwork for a transparent relationship where expectations are crystal clear. Negotiating such terms is an art, ensuring that your IT infrastructure is in safe hands, and setting the stage for a thriving and secure alliance. There are several key areas to consider – the service level agreement (SLA), statement of work (SOW), contract, and billing practices.

Mastering MSP Contracts

Service Level Agreement definition graphic
What is the Service Level Agreement (SLA)?

The SLA: Setting the Standard for Success

The Service Level Agreement (SLA) acts as a roadmap for service expectations. It defines the level of service you can anticipate from the MSP, outlining key metrics like:

  • Uptime Guarantees: This specifies the minimum percentage of time your IT systems should be operational.
  • Response Times: The SLA should define response timeframes for addressing different types of support tickets, ensuring prompt attention to critical issues.
  • Ticket Escalation Procedures: Clear guidelines should be established for escalating unresolved issues to higher levels of support within the MSP.
  • Critical vs. Standard Service: The SLA should differentiate between critical issues requiring immediate attention and standard service requests handled within a defined timeframe. Additionally, it should outline expectations for after-hours support.

The Statement of Work (SOW): A Roadmap for Implementation

The Statement of Work (SOW) details the specific services the MSP will provide, creating a clear path for project execution.

A well-defined start date is crucial for project planning and resource allocation. An ambiguous start date can lead to delays and disruptions. Consider including a reference to the standard tasks or checklist that the MSP will complete before the official start date. This ensures a smooth transition and aligns expectations.

The SOW will also offer insight into the completion date. While these dates are estimates, it will help you to understand how long the project will take. Ask questions about things that could potentially derail your ability to make the deadline and make sure you understand your business' responsibility to provide information and access.

Service Level Agreement categories micrographic
4 Typical Categories for Measuring Performance

Contract Terms: Defining Rights and Responsibilities

A well-structured MSP contract establishes clear expectations and protects both parties in the event of unforeseen circumstances. By carefully outlining the steps involved in service provider transitions, how sensitive data will be secured, and liability, the contract lays the groundwork for a long-lasting, reliable partnership.

Exit Strategies

While an MSP partnership ideally fosters long-term success, outlining clear termination clauses ensures a smooth separation if the need arises. The contract should explicitly define the conditions under which either party can terminate the agreement. This prevents confusion and avoids unexpected disruptions.

Both you and the MSP deserve a reasonable timeframe to prepare for termination. Negotiate a notice period that allows for a seamless transition, including the handover of critical data and systems.

It is also important to understand the costs associated with terminating a contract and under what circumstances there might be financial penalties. Establishing clear grounds for early termination without penalty is also critical. This might encompass situations like:

  • Repeated violations of the Service Level Agreement (SLA) by the MSP.
  • Security breaches demonstrably caused by the MSP's negligence.
  • Insolvency on either side.
This framework is not just about ending the partnership, but about ensuring that everyone understands the service expectations.


Confidentiality clauses play a vital role in protecting your sensitive information. The first step is to define what data is confidential, this is generally:

  • Intellectual property (e.g., proprietary software, trade secrets)
  • Customer data (e.g., personally identifiable information, financial data)
  • Internal processes and procedures

These clauses typically extend beyond the contract’s duration. This ensures your confidential information remains protected even after the partnership ends. Further, look for clauses that obligate the MSP to maintain robust internal security protocols and data encryption practices. This minimizes the risk of unauthorized access to your confidential data.


The contract should address liability issues in case of cyberattacks or data breaches. Clearly define each party's responsibility in the event of a cyberattack. This may involve outlining:

  • The MSP's obligation to implement and maintain appropriate internal security measures.
  • Your responsibility to comply with security best practices (e.g., user password management).
  • The extent to which the MSP is liable for damages resulting from a cyberattack.

Remember, negotiating a fair allocation of liability is essential. The contract should not solely place the burden on you or the MSP for unforeseen security incidents.

By addressing these crucial elements within your MSP contract, you establish a framework for a secure and collaborative partnership.

Billing Transparency: Understanding the Cost of Service

A transparent billing structure prevents confusion and ensures you are paying for the services you receive.

Understand whether your contract includes one-time fees for specific services or recurring monthly charges for ongoing support.

Beware of potential “gotchas” in the billing structure. Ensure clear definitions for terms like licenses, projects, and any additional services outside the core contract. If your user count fluctuates, the contract will clarify how billing will adjust to reflect these changes.  You will want to understand the timing of these charges and how long it will take for your billing to reflect an offboarded user.

If you are purchasing licenses through your MSP, ask how the price they are billing you compares to the price you can get yourself. Generally, your MSP will charge the same price you can get yourself, but there are rare instances where this is not the case.

While not always applicable, some MSP agreements involve the use of third-party vendors or subcontractors. If so, understand how the contract addresses their involvement and associated costs.

Reflection Question: Which service expectations are most important to the success of my business?
Which service expectations are most important to the success of my business?

Making Changes: Adapting to Your Needs

Business needs evolve over time, necessitating adjustments to your MSP services. The ideal approach involves open communication with your designated sales representative or customer success manager. If there are concerns about contract terms, service level performance, etc., be sure and communicate immediately, do not let issues pile up waiting for a meeting. Your MSP wants to support you and address your concerns, do not deprive your business from getting resolution.

Express your concerns and desired changes to your MSP contact. Explore potential solutions and identify areas where the MSP can accommodate your evolving requirements.

Be aware that certain limitations may exist. The MSP may not be able to modify core business processes to suit every client request. However, a collaborative discussion can help identify alternative solutions or service adjustments that meet your needs within the existing framework.

This strategy of sharing your concerns with your MSP also works during the contract negotiation state. If your MSP understands the concern, they may be able to offer a solution that meets everyone’s needs.

Building a Strong Foundation for Success

A well-crafted MSP contract is the foundation for a successful, long-term partnership. It provides clear expectations for managing your IT, fostering trust and confidence as you navigate the ever-evolving tech world. Ensuring that you understand the details of the contract is an important first step to forging a long-term partnership.

Ready to embark on your IT journey with a partner that prioritizes clarity, security, and collaboration? Net Friends is here to help. Contact us to discuss your unique IT needs.

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