A simple guide to creating a robust managed services agreement that protects your business

While businesses focus on their core services, outsourcing managed services play a vital role in helping organisations optimise their operations, reduce costs, and maintain a competitive edge. Whether you are in IT, facilities management, HR, or any other sector that outsources ongoing or support services, a well-crafted managed services agreement is essential for ensuring a successful partnership between service providers and their clients. This guide will explain what a managed services agreement is, why it is necessary, the essential elements it should include, and provide top tips for drafting your own agreement.

Ready to create your own managed services agreement? Use Docue's fully-customisable template to help you simplify the process.

What are managed services?

Managed services refer to tasks that are handled by a third party, allowing the client company to offload or outsource ongoing or regular support services to an expert. The benefits of engaging a managed services provider (MSP) include reducing costs, improving service quality that would be difficult to achieve without specialist expertise, and freeing up internal teams to focus on work that is specific to their business. A company that offers these services is known as a managed service provider. For a well-structured approach, using a managed services agreement template can help ensure all necessary aspects are covered.

Who are managed services providers?

Managed services providers (MSPs) are specialised companies that deliver a range of support services to businesses on a contractual basis. These providers have the expertise, tools, and resources to manage specific functions or processes for their clients, such as IT support, network management, HR services, or facilities maintenance. MSPs typically offer scalable solutions that can be tailored to meet the unique needs of each client, providing both ongoing management and the flexibility to adapt as the business evolves. By partnering with an MSP, companies can benefit from the provider’s industry knowledge and experience, ensuring high-quality service delivery while allowing internal teams to focus on core business activities. A well-drafted managed services agreement can help these relationships operate smoothly.

What is a managed services agreement?

A managed services agreement is an agreement between a managed service provider and a client. It outlines the specific services the provider will deliver, the expectations for those services, the obligations of both parties, and the terms under which the services will be provided. Essentially, it serves as the foundation for a successful and transparent working relationship when it comes to the provision of managed services by an MSP.

Why do I need a managed services agreement?

- Set expectations for services and agree on service levels

A managed services agreement clearly defines the services to be provided, how they will be delivered, and the expected service levels and performance metrics. It also clarifies the course of action if things do not go as planned.

- Protect your business

The agreement outlines the obligations of each party, including how to handle breaches of contract. This legal framework protects your business from potential risks such as non-performance, breaches of confidentiality, or liability issues. A comprehensive managed services agreement will include provisions to safeguard against these risks.

- Ensure you're paid on time

By specifying fees, payment terms, and conditions in the managed services agreement, you can ensure that your business is paid on time and according to the agreed terms. This helps maintain cash flow and reduces the likelihood of payment disputes. You can also outline the consequences of late payments to ensure clarity. Docue's template for managed services agreement includes sections dedicated to payment terms to cover these aspects effectively.

- Enhance credibility

A well-drafted managed services agreement demonstrates professionalism and builds trust with your clients. It shows that your business is organised, understands the importance of clear communication, and is committed to delivering quality services. A managed services agreement template can help you create a robust and professional document in minutes.

What are the essential elements of a managed services agreement?

To create a robust managed services agreement that effectively protects your business, it is important to include several key components. Our managed services agreement template covers these elements thoroughly:

- Specification of services

Clearly define the services you will provide, including any specific deliverables, the location where services will be performed, and any time scales or milestones that need to be met. This section should be as detailed as possible to prevent any ambiguity. A managed services agreement template can help ensure that all these details are properly included.

- Service levels

Establish the service levels that must be met, including metrics such as response times, quality standards, or completion deadlines. This section should also outline any penalties or remedies if service levels are not met. Incorporate these details into your MSA using a well-structured managed services agreement template.

- Parties' obligations

Detail the responsibilities of both the service provider and the client. This could include the client’s obligation to provide necessary access or information, as well as the provider’s obligation to deliver services as specified. A managed services agreement template can guide you in outlining these obligations clearly.

- Fees and payment terms

Specify the fees for the services, the payment schedule, and any terms regarding late payments. Include details on how fees will be adjusted for additional services or changes in scope. Ensure these elements are well-defined using a managed services agreement template.

- Warranties

The warranties are contractual promises that the services provided will meet certain quality standards and performance criteria. Warranties should specify the level of assurance the provider gives regarding the functionality and reliability of the services. For more information about warranties, check out these FAQs.

- Term and termination

Outline the duration of the agreement, including start and end dates, as well as the conditions under which either party can terminate the agreement early. This should include any notice periods required for termination. A well-drafted managed services agreement template will help you include all of the necessary details.

- Renewal terms (if applicable)

If the agreement can be renewed, detail the process for renewal, including any changes to terms or fees. Specify the timeframe for deciding on renewal and the notice required. Use a managed services agreement template to cover renewal provisions comprehensively.

- Liability

Clearly outline the liability of each party, including any limitations or caps on liability. This protects your business from excessive claims and ensures that liability is fairly apportioned. A managed services agreement template helps incorporate these provisions effectively.

- Confidentiality

Include provisions to protect confidential information shared between the parties. This is crucial for maintaining trust and protecting sensitive business data.

- Data protection

With data breaches becoming increasingly common, it is essential to include obligations on each party to comply with data protection laws, e.g. the UK GDPR. Docue's managed services agreement template includes a section dedicated to ensuring each party complies with data protection laws. If any personal data will be processed as part of the managed services, the parties can enter into a separate data processing agreement to ensure each party complies with data protection laws.

- Non-solicitation provisions

To protect your business from losing key personnel, include non-poaching or non-solicitation clauses. These prevent the other party from hiring your best talent during and after the term of the agreement. Docue's managed services agreement includes a non-solicitation clause to ensure you retain your best talent.

Top tips for writing your own managed services agreement

- Be clear and specific

Ambiguity can lead to disputes, so ensure every clause in the managed services agreement is clear and precise. Define terms and ensure that expectations are well articulated. A managed services agreement template can guide you in drafting a clear and detailed agreement.

- Consider service credits and alternatives

Service credits are a common way to compensate for missed service levels, but they are not always the best solution. In our blog about the pros and cons of service credits, we discuss alternative options that might better suit your business needs.

- Tailor the agreement to your business

Make sure to tailor the managed services agreement to reflect the specific needs and risks of your business and the services you provide. A managed services agreement should be customised to fit your unique requirements. You can try Docue's fully customisable managed services agreement to create your own bespoke terms by clicking here.

- Regularly review and update your template

As your business grows or as regulations change, you may need to update your standard managed services agreement. Regularly review the agreement to ensure it remains relevant and effective. Using one consistent managed services agreement template makes it easier to implement updates. With Docue, we will also update our template automatically to reflect any new legislative changes. You can find Docue's managed services agreement here.

Conclusion

A well-crafted managed services agreement is an essential tool for protecting your business and ensuring a successful partnership with your clients. By including the essential elements outlined in this guide and following best practices for drafting your own agreement, you can create a managed services agreement that not only safeguards your interests but also enhances your credibility and professionalism.