Managed Services Agreements

The Agreement – when you pick a Managed Services Provider there is a ton of time and attention placed on the legal terms.  The Whereas’s and Therefore’s all seem to run together – you try in vain to decipher the terms and piece together what has been promised so far and that is actually on the paper.

Unfortunately for businesses, these agreements are carefully crafted to protect the provider and not the customer.  Here are the top things to look out for in a Managed Services Agreements – even one you’ve already signed.

Managed Services Agreements

Broken down here are all the things you should be looking for in a Managed Services Agreement.  Whether you are looking to change providers or want to gain clarity into the legal relationship you currently, take a few minutes to review these critical items.

Retain A Copy

First and foremost, be sure you have a copy of your agreement.  It is SO very common to talk with a business owner who doesn’t know where their agreement is or even if they signed on.  This is dangerous territory.

The Agreement spells out the terms of the relationship between you and your provider, keeping a copy on hand is critical to ensuring the relationship stay solid and you can easily refer back to the original terms.

Plus, if you DON’T have a copy and you request one because you want to review the terms or make a change – this will most likely raise red flags with your provider.  If you currently don’t have a copy, even if you are happy with your current relationship, go ahead and request a copy for your records.

Term

FIRST – Do yourself a HUGE favor and simply refuse to sign an agreement over 1-year in term. 

Managed Services Providers who offer 2 or even 3-year agreements usually do so by providing a discount for multiple year terms, which is enticing – purposely so.  The intent behind this type of arrangement is to trap you in a long-term relationship with little no way to make a change.  Plus, who can possibly know what your business will need three years from now?  It’s insane!

Best case – your provider offers month-to-month agreements which will leave the power where it should be – with you!

Cancellation

You will have to look long and hard to find the cancellations provisions – they are often purposely hidden or even missing.  But find them you MUST.  Know exactly what options the agreement gives you for getting out of it.

IMPORTANT – Most all Managed Services Agreements have very onerous cancellations provisions as it related to the Renewal Provisions (covered next)  The two normally work in conjunction to ensure you have a VERY narrow window in which to exit the agreement.  Often the cancellation provisions state something like you have to give written notice 90-days PRIOR to the renewal.

For example, if your agreement starts January 1st then you have to give written notice before October 1st to cancel the agreement.

Renewal Provisions

Almost every single business owner I speak with is under the belief that their Managed Services Agreement ends once their term is up and converts into a month-to-month agreement.  I hear it all the time!

When in fact, most Managed Services Agreements automatically renew for a subsequent term equal to the initial term of the agreement.  It is called an ‘evergreen agreement’ and is the most common way businesses get trapped into agreements when they are well past wanting to make a change.

The Renewal Provisions and Cancellation section work together to trap you.  It works like this – you sign an agreement on January 1st with a 1-year term, an auto-renewal and a 90-day cancellation provision.  If you don’t notify your provider IN WRITING prior to October 1st, you are stuck for another year.

Non-Solicitation

You can rest assured that there will be a non-solicitation provision in your agreement that protects your provider against you trying to hire their talent.  This provision typically spells out a time frame after employment that prevents you from hiring their employees without a monetary penalty.

The thing to keep in mind is that this provision should GO BOTH WAYS.  What’s good for the goose is good for the gander!

Non-Disclosure / Confidentially

When entering into a Managed Services Agreement, it is common that you and your provider may be exposed to certain proprietary and confidential information related to specific and general business operations of the other.  This information should be protected under a mutual non-disclosure / confidentially agreement.

Non-Performance

If you do nothing else, please be sure that there is a statement that allows you to cancel the agreement if the Managed Services provider fails to perform to reasonable standards.  In most cases, these provisions require that you notify the provider that their services failed to meet expectations and give them a certain amount of time to correct the issue.

Be certain that this provision exists and you know EXACTLY how to exercise your rights to get satisfactory service.

Included Services

This section should list exactly which services are included in the agreement, including frequency and performance standards.

Excluded Service

Even more important than the Included Services is the Excluded Services which explicitly state what is NOT included, i.e. what you might get a bill for.  A very common bait-and-switch is to list “Unlimited Remote Support” in Included Service and list “Onsite Support” in Excluded services – often businesses don’t pay close enough attention to this and end up thinking they are getting unlimited support and get surprised when they receive a bill for on-site services that would be free if done remotely.

The included/excluded services section is critically important if your provider offers a ‘tiered’ service model as I’ve discussed in Managed Services Tiers – Part 1 and Managed Services Tiers – Part 2.  I often hear from business owners who heard all the goodies of the ‘gold’ plan while signing up for the lest costly ‘bronze’ plan and getting trapped into surprise support bills.

Documentation

All documentation that your Managed Services Provider develops around your environment should be yours – be sure this is stated in the agreement and that you can receive a copy of any and all documentation at any time.

 

Have more questions about Managed Service Providers in your area? Check out our Managed Services Guide for more information.


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