Welcome to the final part of my trilogy on managed service provider (MSP) contracts! I had to add some excitement because the topics I’m covering in this last instalment may seem, well, a little boring. However, while they may not be the most exciting sections of your managed services agreement, they can be the most important, the most dangerous, and the most effective parts of your contract. The sections we will cover in this post will need the additional attention of your attorney due to the nature of their subject matter.
Confidentiality is critical to what we do as MSPs because of the level of access we have to client data. First and foremost, you should make sure you and your employees only have access to what is absolutely necessary to perform the agreed work. Anything additional opens your company up to unwanted liability.
So what should you include in your contract? The following are essential:
Another tricky scenario I have seen occur more than once is when your client hires away one of your techs. This is usually experienced in one of two ways: either your tech leaves you to go into business themselves and then takes the client away from you; or the client hires them directly as an employee.
Neither one of these scenarios is acceptable. Even though it never happened to me, I am always angered when I hear about it. So what can you do? Firstly, make sure your agreement includes wording specifically to protect yourself against this happening; including some sort of financial remuneration package should one of your clients try it.
This is fair for two reasons: firstly, the customer is obviously going to cease their relationship with you and therefore you will have a loss in revenue; and secondly, you most likely have a significant investment in the development of your employee, and replacing them will be costly. So it is reasonable to seek recompense on both counts. Keep in mind your employment agreement with your employees should also include similar wording.
I have mentioned more than once in this series that setting expectations is an important role of the contract. Why? Because most people think that a contract is only ever used when someone breaks it and it must be enforced. Personally, I believe that a contract’s primary purpose is to properly set expectations so they are never broken or challenged in the first place.
The beginning of setting those expectations is the baseline. Knowing where you and your client are starting from is vital to understanding where the relationship is supposed to go. This includes an appendix, listing all of the customer’s current hardware and software, which defines what you are covering and what you are not covering based on age, access to software support, or warranty.
It is important that this listing is accurate, since any device or software not included will be ambiguous and therefore have no expectations set and can become a point of contention between you and the customer. You might also include estimates for project work to bring out-of-compliance devices or software into compliance so they will be covered.
While we are talking about expectations it seems fitting to also talk about liability. Your liability clause should not be written by anyone except your attorney. Your lawyer is the one who will most likely defend your contract and therefore, he or she should be the one who defines what warranties, disclaimers, remedies, etc. are included. Furthermore, this section has profound ramifications on the enforcement of said contract both in terms of what you may be liable for and to what degree. This can be the difference between you losing a thousand dollars and losing your house. That is the limit of my advice on this one. Hopefully I gave you enough cause for concern to make sure you engage an attorney.
Last but not least, there is almost always a “General Provisions” section that defines all of the stuff that should be common sense, but gets spelled out so there is no confusion. Again, there is very important but seemingly boring information in this section that can have enormous consequences if the contract requires enforcement. Please consult an attorney and do not just copy and paste from some other generic contract.
I hope you found this series useful. I also hope it gave you a new perception of why we should have agreements with all of our customers. Setting expectations is the first step in an honest and open relationship where both parties benefit. Your contracts should improve your client relationships by accurately defining the work to be done, how it is to be done, and what happens when something goes wrong.
And one last time, please consult a lawyer. Most of the ones I have known are actual human beings who care about you and your business. They would rather charge you a little money over time to prevent a problem instead of charging you a lot at once to get you out of trouble later. Hmmm, that sounds familiar…
Eric Anthony is Director of Customer Experience at SolarWinds MSP. Before joining SolarWinds, Eric ran his own managed service provider business for over six years.
You can follow Eric on Twitter® at @EricAnthonyMSP
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This document is provided for general guidance and informational purposes only. It is not and shall not constitute legal advice. Information and views expressed in this document may change and/or may not be applicable to you. SolarWinds MSP makes no warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information contained herein. If you have any questions in regard to the applicability of any law or regulation discussed herein to you or your organization, we encourage you to work with a legally qualified professional.
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