Managed services contracts are essential for any business relationship, yet 42% of businesses still rely on informal agreements. This oversight leads to misunderstandings, service disputes, and unexpected costs that could have been avoided. Does it sound familiar for you?
At RCOR Technologies, we help businesses navigate the complexities of MSP agreements every day. This guide will walk you through the 12 clauses a managed service contract or agreement should have, common pitfalls to avoid, and practical tips for negotiating favorable terms. Whether you’re signing your first MSP contract or reviewing an existing one, you’ll learn how to secure an agreement that delivers value and peace of mind.
Why Every MSP Engagement Needs a Written Contract
A contract specifies exactly what services you’ll be provided with, how support will work, and what each party will be responsible for.
This information protects your business, makes sure you get the value you’re getting, and provides peace of mind. At RCOR, we believe that every MSP relationship starts with a clear agreement that is an excellent fit for your needs.
12 Clauses A Managed Service Contract or Agreement Should Have
Every managed services agreement should include certain key clauses to protect both your company and the provider. Here’s what to look for in a bullet-proof contract.
1. Services & Exclusions
In this section, the agreement defines what services the Managed Service Provider (MSP) will provide and which may include, for example, network monitoring, cybersecurity, help desk support, etc. It also defines what is not included in the services as well, for example, hardware replacements or project-type work.
By outlining the services that are included and excluded clearly, this section can eliminate scope creep and help you avoid surprise charges. For example, if cloud hosting or software upgrades are not included in the service, by putting this in writing, you can make plans if necessary.
2. Response & Resolution SLAs
This section sets expectations for how quickly the MSP will respond to and resolve issues. This might include guaranteed response times for critical security incidents or standard support requests.
If your contract promises a one-hour response for urgent issues, you can hold the provider accountable.
3. Escalation Path & Points of Contact
Here, you’ll find out who to call when everything is a mess. This clause outlines the escalation process, including key contacts at both your company and the MSP.
Having a clear path ensures that urgent problems get the right attention and are resolved quickly, reducing frustration for your team.
4. Pricing, Billing, & Annual Uplift Caps
This is really important and something to be aware of. Your contract should spell out how much you’ll pay, how billing works, and any annual price increases.
Surprises are not welcome and this is the best way to avoid them. Look for details on payment terms, what’s included in your monthly fee, and how extra work is billed.
Annual uplift caps protect you from unexpected cost jumps, making it easier to budget for managed services year after year.
5. Data Protection & Privacy
This clause should cover how your information is stored, who has access, and what privacy standards apply.
Your information is one of your most valuable assets, so you NEED to protect it, know where it is and where to put it to be safe and reachable.
6. Security Standards & Compliance Duties
You know what they say: Cybersecurity first! This section should outline the security standards your MSP must meet, such as SOC 2 Type II or specific industry regulations.
It should also clarify who is responsible for compliance tasks and what happens in the event of a security incident: what to do when cyber chaos strikes.
7. Reporting & Performance Metrics
Regular reporting keeps you informed about service performance, security status, and open issues. This clause should specify what reports you’ll receive, how often, and what metrics will be tracked.
For example, you might get monthly uptime reports or ticket resolution statistics, helping you measure the MSP’s value and general performance.
8. Change-Control Process
Technology needs change over time. The change-control process explains how you and the MSP will handle requests for new services, upgrades, or changes to the environment.
This ensures that all changes are documented, approved, and priced fairly, reducing the risk of miscommunication or unexpected costs. Again, NO surprises, NEVER!
9. Customer Responsibilities
Hey, don’t think you will get rid of all the work. A managed services agreement isn’t one-sided. Your business will have responsibilities too, such as providing timely access to systems, designating a point of contact, or following security policies.
Outlining these duties helps avoid delays and ensures the MSP can deliver quality support, so everybody’s happy.
10. Termination & Exit Support
If the relationship ends, you need a clear exit plan. This clause covers how either party can terminate the agreement, required notice periods, and what support you’ll get during offboarding.
It should address data access, transition help, and any fees, so you’re not left stranded if you switch providers.
11. Liability & Indemnification Limits
This section limits each party’s financial risk. It should state the maximum amount the MSP is liable for if something goes wrong, such as a data breach or service outage.
These indemnification terms protect your business from third-party claims related to the MSP’s work.
12. Force Majeure
Force majeure covers events outside anyone’s control, like natural disasters or major cyberattacks. This clause explains what happens if such events disrupt services, and what steps both parties must take.
It protects your business from being held responsible for issues no one could prevent.
What’s Not Covered: Common Gaps That Drive Extra Charges
Many managed services contracts leave out things like after-hours support, on-site visits, or project-based work. If these aren’t included, you’ll pay extra when you need them.
Always check for gaps in coverage, such as hardware replacements, software licenses, or advanced security solutions. Knowing what’s not covered helps you avoid surprise costs and plan for your business needs.
Best Practices When Drafting or Reviewing a Managed Service Contract
A strong managed services agreement protects both sides and sets your business up for success. Here’s how to get it right.
Avoid Scope Creep With Clear Deliverables
The first and most important step is to define precisely what services are included, providing as much detail as possible. A vague language will lead you to misunderstandings and extra charges.
Use a clear statement of work and review it regularly to keep your agreement aligned with your business needs.
Set Realistic, Measurable KPIs
Specify realistic and measurable key performance indicators (KPIs), like response times or system uptime. This allows you, your team, and the MSP to easily measure performance and hold one another accountable.
Use Plain Language, Not Dense Legalese
Contracts should be easy to read and understand. Avoid legal jargon or technical words that leave your team confused. Plain language makes it easier for everyone to comprehend their rights, responsibilities, and what to expect from the partnership.
Negotiation Tips: Getting a Win-Win Managed Service Agreement
This should be a win-win agreement. Aim for a balanced agreement that protects both your business and the provider.
Be open about your needs, ask questions, and don’t be afraid to negotiate terms like pricing, response times, or exit support. A win-win contract builds trust and sets the stage for a long-term partnership.
Red Flags to Watch Before Signing Managed Service Agreement
Look for these four common mistakes and hurry to correct them in the contract if you see them:
- Vague scope definitions
- Unclear pricing
- Missing security standards
- Unclear responsabilities
Don’t sign until you’re confident the agreement protects your business.
Need a Bullet-Proof IT Service Contract? We’ll Help!
A solid managed services agreement safeguards your company and establishes parameters for the IT support you’ll receive and their expectations. When you make sure that all of the terms are in included from service definitions to security obligations, you are setting your business up for success and avoiding the impact of costly misunderstandings and conflicts on your business operations.
Are you ready to protect your business with a solid managed services agreement? Our the team at RCOR can help you draft and then negotiate every aspect of your managed services agreement.
RCOR assists businesses like yours create thorough MSP agreements that satisfy both sides of the agreement. Contact our team today to discuss your managed services situation, and to ensure your next IT contract contains everything you need to protect and support your company’s goals.