As a managed service provider, your contracts are critical for protecting your business and managing client expectations. Whether you’re creating your first contract or you’ve been using MSP contracts for years, it’s always a good idea to periodically review your contract language and make sure it applies to the services you provide today.
In this post, we’ll share clauses to include in MSP contracts, explain how to prevent scope creep, and look at the pros and cons of DIY contracts versus hiring a lawyer to create one. (This post is not legal advice).
Essential clauses for MSP contracts
MSP contracts — also known as master service agreements — should at a minimum include the terms of service, responsibilities for both parties, and the scope of the MSP-client engagement. Here are some specific clauses MSPs should include in contracts:
Liability clauses
An MSP contract should define the extent of liability for each party. You can state that you are not liable for the failure of third-party applications, and limit the dollar amount of your liability resulting from technician negligence.
Think of all that can go wrong in a client relationship and account for that in your liability clause. For example, assume you manage user permissions for a client, and that client terminates an employee but fails to notify you. As a result, the former employee still has access to critical business systems and deletes several important files. While that’s not your fault, a client could pursue legal action against you if your contract doesn’t state that they’re liable for losses resulting from their errors.
Termination terms/process
A well-defined termination process protects both parties and provides a clear path forward if the relationship isn’t working out.
Termination clauses outline the steps to initiate termination, any required notice period, and potential penalties associated with early termination. They should also define offboarding processes, like how to transfer asset event logs to the client and when open tasks will be resolved.
Keep in mind that either party may want to terminate an agreement. If you have a client that’s not the right fit, or is routinely raising “red flags,” your contract should give you an option to terminate the relationship.
Data ownership language
Data ownership clauses clarify who owns the data created, processed, or managed during the course of the service engagement and how or if it will be returned to the client. If you are handling healthcare provider data, you’ll need a separate Business Associate Agreement, as required by HIPAA.
Service-level agreements (SLAs)
SLAs are critical components of MSP contracts, setting out the quality and performance expectations for services rendered. Include metrics for uptime, response times, and issue resolution to help manage client expectations and accountability.
Define the client’s options for recourse if you fail to meet the terms of your SLA. Termination shouldn’t be the only solution here — spell out how you will make things right.
Master service agreement vs. managed service agreement
“Master service agreement” and “managed service agreement” are often used interchangeably in the MSP sector, but these are different documents. Here’s a quick comparison:
| FEATURE/ASPECT | MASTER SERVICE AGREEMENT | MANAGED SERVICE AGREEMENT |
| Purpose | Establishes a broad framework for all potential services and transactions between parties. | Specific to managed IT services, outlining service expectations, responsibilities, and performance metrics between a service provider and client. |
| Scope | Broad and general, covering all potential projects and interactions over time. | More focused on particular managed services, usually limited to IT support and maintenance tasks. |
| Flexibility | Highly flexible, allowing modifications for individual projects under the overarching agreement. | More static in terms of details since it often covers standard services provided consistently under similar terms. |
| Contents | Includes terms regarding payment, liability, confidentiality, intellectual property, and dispute resolution. | Specifies service deliverables, service levels, performance metrics, and pricing related to ongoing IT management services. |
| Usage | Used to simplify the creation of detailed contracts for new projects by providing a general agreement framework. | Used when consistently managing IT services on a long-term or ongoing basis for a client. |
| Modifications/updates | Can be updated with Statements of Work (SOW) or supplements for specific projects. | Typically renewed or renegotiated based on changes in service requirements or at the end of the service term. |
| Legal complexity | Usually more complex, addressing a wide array of potential legal issues across different projects. | Legal issues tend to be more specific to services rendered and performance outcomes. |
| Financial terms | Standard billing terms and conditions are outlined generally, which can be adapted via project-specific agreements. | Clearly defined payment structures and terms related to the managed services provided. |
| Risk management | Covers broader risk management strategies, potentially mitigating risks associated with various types of services. | Directly addresses risks related to IT service continuity and performance failures. |
If you want a deeper dive on what to include, take a look at Syncro’s master service agreement.
Avoiding scope creep in MSP contracts
Scope creep occurs when the contracted work extends beyond the agreed terms, often resulting in increased costs and strained client relationships.
To prevent scope creep, clearly define the scope of services upfront. Detail the specific deliverables, timelines, and any exclusions. Establish a process for handling additional requests, ensuring clients understand that changes or urgent requests may require renegotiation and impact pricing or timelines.
DIY contracts vs. hiring a lawyer
Creating contracts yourself might be less expensive upfront, and there are numerous templates available that can guide you through the process. However, crafting a DIY contract comes with the risk of missing vital clauses or failing to comply with legal standards, potentially leading to costly legal disputes.
Hiring a lawyer to draft your contracts increases upfront costs but can provide peace of mind and mitigate risk. An experienced attorney ensures all necessary protections are in place and that you’re following applicable legal standards. Some MSPs use a hybrid approach, crafting their own contracts, then asking a lawyer to review them.
How Syncro helps MSPs manage contracts
Syncro helps MSPs manage contracts, from creation to renewal. You can integrate agreements directly into the platform, and use these features to manage your relationships:
Automated billing: Syncro ensures accurate invoicing by aligning billing with contract terms. Billing automation reduces human error, creates consistent, timely invoices for recurring services. and ensures billable time is within scope for every project.
Custom SLAs and performance tracking: With support for custom SLAs, Syncro helps MSPs meet client commitments by tracking performance metrics and producing reports for clients.
Integrated ticketing system: Avoid unauthorized scope changes with Syncro’s smart ticketing system, which links directly to contract details. Any work outside the contract’s terms is flagged, preventing unintended scope creep.
Automated renewals and reminders: Syncro simplifies contract renewals and price adjustments with automated reminders, ensuring you never miss critical dates and can maintain favorable terms.
Customer portals: Improve client transparency with Syncro’s customer portals. Clients can review service agreements, invoices, tickets, and policies, without needing to contact anyone.
Improve your contract management with Syncro
Creating solid MSP contracts is the first step, but you need a way to manage contracts over time and ensure your clients and your business are upholding obligations. Syncro helps you weave contracts into your workflows and operations processes for greater visibility and alignment.
Creating and refining contracts is part of business growth. For more tips on how to grow your business, check out our Masterclass: Lessons on Driving Growth & Profitability.
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