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What Every Technology Service Agreement Should Include
The technology service agreement defines more of a relationship than most firms understand. Here are some best practices.
Many MSPs have a love/hate relationship with technology service agreements, yet agreements are a very important piece of any business correlation. They help to define the relationship and how to handle conflicts should they arise. More importantly, they allow you to negotiate the end of a relationship before it happens.
The value of having an agreement was embedded in me early on in my career with an all familiar business story of a handshake agreement. I held up my end of the bargain, yet the client failed to pay me.
From that moment, I vowed to minimize the risk and likelihood of ending up in that position again, as you can see I said minimize and not eliminate as I don’t believe you can ever eliminate the possibility of non-payment in the MSP world.
As with anything else there are many schools of thought when it comes to agreements. Should your agreement favor you or the client? You can go either way, but I believe that your agreements should be fair to both parties with a slight tilt in your favor.
My view is that our responsibility as managed service providers is to deliver a service and it is the client’s responsibility to pay for that service without hindering our ability to deliver it. Additionally, both parties should uphold their end of the bargain. That viewpoint is the core of our technology service agreements.
There are many subsections that should be included in your agreement, but we will focus on what I consider the essentials. Certain parts of your agreement should never change, and others will as situations or the industry changes.
Your agreement should clearly specify the services and deliverables that you will be providing. As I previously mentioned, you have a duty to perform for your client. Those duties should be written out, so everyone is fully aware of what your responsibilities are.
Any other services that are asked to be rendered outside of your specified services and deliverables should be considered out of scope and billable.
Your normal business operating hours, after hours and a holiday schedule should be specified as well.
Your agreement should include escalation procedures. How are support tickets entered? Does the client call or e-mail to request service? Is there a communication method that you forbid? Texting is a big one that often comes up.
You can explicitly state that any request for support via text message or outside of the options you provide are explicitly forbidden or won’t be honored.
When do you dispatch a tech on-site? Is it when you want to or when the client requests it? Is that included or billable above and beyond the agreement?
What is a covered device/user? Technology ages and gets dated and we have all dealt with clients who will not replace old hardware. Defining a covered device allows you to specify the minimum system requirements for covered devices.
I highly recommend you define what causes a covered device to become an uncovered device during the term of the agreement.
Devices that have reached end of life, operating systems and line of business applications that are end of life should drop off your agreement and not be your responsibility without additional costs. This is a great way to make sure that your client is upgrading hardware and software using a proper replacement cycle.
What is a covered user? Same questions apply, does that extend to a person’s home computer or personal mobile device? Decide how you want to define a covered user as it pertains to their work environment.
Your agreement should specify pricing and this portion of your agreement might be your most comprehensive section. Are you pricing per device, user or is it a flat rate pricing model? Whatever the method is, it should be outlined in the pricing section of your agreement.
How many devices are covered? How many users? Are there multiple locations? Are additional services priced in? E-mail hosting, spam filtering, backups, password management system, etc.
An area that can cause an issue is that some of our costs fluctuate over time. You can address this in your pricing section as well. How is out of scope work charged? What happens if the client adds a user or device or service?
These are things that need to be accounted for and you should also include a catch all to address things that are not included as billable above and beyond the agreement.
Additionally, payment terms and what happens if the client does not pay on-time need to be addressed. Receiving compensation for services rendered is extremely important. What are your payment terms? When are invoices considered late or overdue?
When can you turn off services without violating your own agreement? When is the client considered in breach of the agreement due to non-payment?
Your technology service agreements should include the term of the agreement. Month-to-month, one year, three years, five years? Will the agreement auto-renew at the end of the initial term or does it convert to a monthly agreement?
Every state is different on auto-renewals and their validity so be sure to check your local laws. They are especially different when it comes to residential versus commercial accounts. Do you get a raise at renewal?
Termination of the agreement is very important. If you included an auto-renewal when does a client have to notify you of non-renewal? If the client cancels the agreement prematurely what is the financial consequence for performing such action? What is your out if the client stops paying?
How long do you have to keep performing services until you are able to terminate them without breaching your own services? What options does the client have if you stop performing services and have a failure to perform? All these questions must be addressed in this portion of your agreement.
Limitations of liability will aid in capping the potential damages that you could be exposed to in the unfortunate event of a lawsuit.
Jurisdiction is important if you are an MSP that services clients in other counties or states. If the need for legal proceeding were to happen it is best that they happen under your county, state, and governing law.
Special terms. In very limited circumstances you may have some special terms in an agreement. Maybe extending your standard business hours for a client or payment schedule. This portion of your agreement is completely discretionary.
As you can see there are many things that can help you craft optimal technology service agreements. It is best to understand what you are trying to accomplish and make sure your agreement does that for you. It is in your best interest to protect you and the client by crafting something that works for both parties.
You do not want your client to feel trapped if you fail to perform and you don’t want to be trapped if you have a non-paying/non-compliant client.
What I have shared above is my advice and I am not an attorney. You should always seek your own counsel to make sure your agreement is enforceable and comply with the laws that govern your state.
About the author: Stanley Louissaint is Principal & Founder of Fluid Designs Inc. He has been a member of The ASCII Group since 2014.
Reprinted with permission, courtesy Commercial Integrator