The market for managed services is growing fast, and it’s expected to reach $43.94 billion by 2026. That means more businesses than ever are choosing managed services to reduce costs, increase productivity and boost their bottom line.
Outsourcing IT is a serious decision because your business will depend on the service levels of an external company. A managed service agreement (MSA) or service level agreement (SLA) can give you peace of mind because it helps clarify service expectations. It also defines managed service provider (MSP) responsibilities while outlining any penalties incurred if the MSP misses any targets outlined in the agreement.
Developing a managed services agreement requires negotiations between parties that help clarify all facets of the relationship. That is why an SLA is more than just a managed services contract. It is a critical tool that identifies expectations and responsibilities while clarifying communication between clients and service providers.
Besides describing precisely what services are being delivered, an SLA gives clients a way to measure the delivery of those services and receive compensation if the MSP misses any service-level targets.
Networks can go down, and outages can occur. The SLA defines service goals, such as a 99.99% uptime guarantee, while allowing provisions for factors that may reduce uptime, such as scheduled maintenance.
As part of their delivered services, MSPs use a monitoring system that tracks uptime and service outages. This allows clients to track service availability and understand how credits are calculated if the service guarantee is not met.
Managed service provider agreements vary significantly between providers. They depend on many factors such as the types of managed services being provided, governmental laws, and regulatory compliance. Some of the most common section categories included in a managed service agreement are:
The agreement overview can span several separate sections that define details such as the purpose of the agreement, involved parties, agreement duration, and document structure.
Many agreements have a section with definitions clarifying the meanings of key terms used throughout the SLA.
The scope of services section is an extensive part of the agreement that defines details such as:
The scope of services section is among the most detailed in the SLA document and usually includes the following information:
A section with MSP responsibilities usually covers the following areas:
The service agreement section of the SLA gives information about service offerings that can include:
The client services section includes information detailing how services and content are purchased, how they are priced, payment terms, and any details about adding subscriptions.
Other sections can include client responsibilities, compliance, usage limits, and usage restrictions. Some MSPs may also have sections about storing or transmitting prohibited or illegal content, and any conditions for content removal.
Sections detailing payment and fee information usually include details such as:
Most agreements should have a section detailing proprietary rights and licenses that gives the MSP the right to host, copy, display and transmit data within their systems as part of their services.
The SLA confidentiality section outlines provisions confirming that data is kept confidential according to the terms and conditions of the agreement.
Since SLAs differ so widely between MSPs, it’s important to ask some critical questions that can include:
While SLA agreements vary significantly, the following clauses usually contain critical information that must carefully be evaluated before an agreement is reached:
Some MSPs require payment following the delivery of services, while others stipulate it must be made in advance. Ensure you are entirely aware of the state of your services and data in the event there is a failure to pay, including any interest charges. Check the fees and payment schedule section to make sure you agree with all the terms.
Carefully evaluate the termination clause to determine what you need to do if you wish to terminate the contract. This includes written notice, any additional payments that must be made, and any procedures or obligations that must be fulfilled before you can end the contract.
A force majeure clause is a contractual provision that defines any change in obligations arising from an extraordinary event beyond the control of either party. That could include a natural disaster, act of terrorism, or other events that prevent the fulfillment of obligations outlined in the contract.
If there is a force majeure clause in the SLA, carefully evaluate how it is defined and how it affects the MSP’s responsibilities. In most force majeure clauses, the contractual language typically provides adequate client coverage, stating that reasonable efforts will be taken to minimize the duration and consequences of any performance delay resulting from a Force Majeure event.
An MSA is a standard contract between two parties that lists terms for future agreements or transactions. In contrast, an SLA is an agreement that typically goes in a single direction between a service provider and a client.
Revising your managed services or service level agreement should take place if specific parts of the original agreement are no longer in line with your business’s goals and objectives. Many businesses choose to conduct reviews every year to identify any clauses that can be amended when the agreement is up for renewal.
An SOW is usually created with specific work that may either be temporary or project-based. An SLA typically covers a long-term service arrangement between a client and a service provider.