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Home / Business Contracts / Managed Services Agreement

What is a Managed Services Agreement?

Managed services is where an entity outsources work involving maintenance and monitoring of IT related business systems. A managed services agreement therefore is a contract for the provision of the managed IT services. Companies that provide these types of services are called managed services providers.

Why do I need a Managed Services Agreement?

Whether you are the business owner or are the managed service provider, you must secure a managed services agreement to protect your interests. If you are the business owner, imagine going through the trouble of looking for another provider while you are in the middle of settling disagreements with your current provider!

On the other hand, if you are the service provider, you would not want to be required to do more work than you initially agreed to, right (even though if you work with the Commonwealth there could be some significant scope creep – we’ve seen this a few times!)? Everything must be stated clearly in the written agreement so that you are clear on what to expect from the other party.

What are the key clauses of a Managed Services Agreement?

Services to be provided – Not all businesses have the same need. That is why it should be made clear what services will be provided and what is not included in the scope. The business owner must know what level of support they can expect, and the provider must be aware of the services they are expected to perform. Other details such as how the work will be performed should also be written in detail, such as deliverables and reports, if the parties deem this necessary.

Access and permission to systems and network – Since the provider will monitor and maintain the business owner’s IT systems, access must be provided. The agreement must contain the level of access the provider has and the limitations to what they can or cannot perform within the business’ systems.

Response time – As most businesses are dependent on their IT systems for their day-to-day operations, the time it will take for the provider to respond should be written in the agreement. This may be dependent on the urgency each type of need is categorised as. Managed services providers should not commit to a response time that they cannot fulfill. They should be able to provide what is doable for them, depending on the level of priority.

Limitation of liability – A clause limiting liability is valuable for the provider especially in circumstances where the provider causes some sort of loss to the business owner. This is where competing tensions arise.
The business owner will most likely not want to agree to a liability cap, but the service provider also will not want to sign up to a contract to provide services where they have unlimited or open ended liability should they cause damage. This can be a tough one to balance and the easiest way to do that is to have the risk reflected in the price – so that the price comes down if the risk profile for the service provider changes.

Confidentiality – This is one of the most important clauses in a managed services agreement. Because providers are to be given access to sensitive information, business owners are sometimes hesitant. Having a written agreement where confidentiality is required of the provider will assure the business owner that it is okay to give the access required.

Payments – Just like every service contract, the terms and mode of payment must be disclosed in the written agreement. Most managed services providers are paid on an ongoing basis, generally monthly. Whatever schedule of payment the parties deem best for their needs must be stated in writing.

Dispute resolution – In a perfect world disagreements never arise, but only Peter Pan lives in a perfect world. So it is always smart for the agreement to set out a mechanism for the resolution of disputes between the parties if required. This way you can compel the parties to try and resolves their disputes by negotiation instead of resorting to the courts right away.

Term and termination – Because most managed services agreements are for an ongoing basis, a clause that provides how long the services shall continue and how the agreement will be terminated must be included in the agreement. If you are dealing with the Commonwealth, the Commonwealth will always the ability to terminate for convenience. Don’t fight it. Just deal with it.

What is the difference between IT Support and Managed Services?

IT Support generally does not include preventive or proactive maintenance or administration and is usually a reactive service where assistance is provided when something fails. Managed services, on the other hand, is usually a proactive and preventive form of management whereby the provider monitors diagnostic information and hopes to head off IT issues before they arise.

Any questions please feel free to get in touch.

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