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Five questions to answer before you sign a Managed Services contract

March 7, 2019

If you're a typical small business owner, you don't have a contracts lawyer on staff. When shopping around for a Managed Services Provider (MSP) to handle your IT needs, you might be inclined to skim the contract they give you and then just sign it. Our advice: don't. Instead, take a minute to look for key elements that will make a big difference in your long-term satisfaction with this MSP.

Here are our top five questions you should be able to answer after reviewing an MSP contract.

QUESTION #1

Is the contract clear and readable? Can the Managed Service Provider explain its provisions?

  • Did your MSP make the contract available as a digital copy with searchable text? Is the text legible? IS IT ALL IN CAPS? Is the language vague and confusing?
  • Recommendation: Make sure the MSP provides a copy of the contract you can search and comment on. If any provisions are confusing, ask the account rep to explain them to you. It's a warning sign if the only person who can explain it is a lawyer.

QUESTION #2

What would you need to do to terminate the contract? What termination fees and length of notice would be required?

  • Find the clauses that tell you when the contract ends and what steps are required if you want to end it early. If your services are in separate Statements of Work, each one may have different termination requirements. Make sure any early termination fees are acceptable.
  • Recommendation: Early termination fees can be significant if the partnership doesn't work out. Consider asking the new MSP to agree to a trial period of 2-3 months to evaluate their services.

QUESTION #3

What services are included and excluded?

  • The contract, or an attached Statement of Work, should make clear which services the Managed Service Provider will and will not provide for the fixed fee you're paying. If the price varies based on device or user count, make sure you understand how the price will be calculated. Look for any conditions, such as after-hours requests, that would trigger an additional fee. Watch out for exclusion language that's too strict – for example, excluding support of an application or platform your company depends on. MSPs should be willing to extend coverage to critical line-of-business applications in exchange for a higher monthly support price.
  • Recommendation: Make a copy of the contract sections that cover included and excluded services. Keep it handy in case you need to dispute an invoice.

QUESTION #4

Do you understand the Service Level Agreement (SLA)? What remedies are available if the MSP fails to meet it?

  • A good service contract should include an SLA that requires the MSP to meet certain standards (e.g., the MSP should respond to any critical ticket within 30 minutes). Make sure you understand what the Service Level Agreement covers. Look for a section specifying what remedies and consequences are triggered if the MSP doesn't abide by its SLA.
  • Recommendation: Ask the MSP how Service Level Agreement compliance is tracked internally. Make sure the MSP is willing to share broad metrics related to its performance resolving your requests. Be wary of any provider that requires you to provide your own documentation of Managed Service Provider violations.

QUESTION #5

How will disputes be adjudicated?

  • Many contracts these days limit not only when you can dispute a bill, but also where you can contest the contract itself. The contract may require you to use binding arbitration, or it may require a lawsuit to be filed in a distant court. Make sure you identify any limits on your right to dispute invoices or breaches of contract, and make sure they're acceptable to you before you sign.
  • Recommendation: If the Managed Service Provider wants the laws of a distant state to govern the contract, ask first for the contract to be governed by your state (who knows, they might say yes!). If they decline, ask next for the contract "to remain silent," i.e., to not specify any forum, regarding governing law. This would allow you to file suit in your state if needed and place the burden on the MSP to show that the suit should be moved.

We hope this article helps to put you in a strong, informed position when choosing a Managed Service Provider (MSP) to serve your company's IT needs. If you are a business owner in North Carolina, we would love to discuss our Managed Services offerings. We also license a Managed Services contract package to IT companies looking to start their own MS division.

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