Master the MSA for Your Managed Services Providers

Master the MSA for Your Managed Services Providers Perfect your MSAs by avoiding disputes, clarifying obligations, and customizing your agreements. Info-Tech Research Group, Inc. is a global leader in providing IT research and advice. Info-Tech’s products and services combine actionable insight and relevant advice with Info-Tech's products and services combine actionable insight and advice ready-to-use tools and templates that cover the fullrelevant spectrum of IT with concerns. and templates that cover the full spectrum IT concerns. © 1997 -2018 Info-Tech Group © of 1997 -2018 Info-Tech Research Group Research Inc. Info-Tech Research Group 1

ANALYST PERSPECTIVE Do you have a sound MSA agreement? What are the obligations on both sides of the table? What might be missing from your MSA? ‘Managed services’ is the professional services buzz term of the year. A wide range of services fall under this umbrella, but it primarily includes a white-label offering coupled with highly targeted skillsets directed at fulfilling a specific IT function. It is vital that your IT-managed services contract reflects the appropriate attention to critical terms and conditions that can make or break your deal. Scott Bickley Research Lead, Vendor Practice Info-Tech Research Group SAMPLE Info-Tech Research Group 2

Our understanding of the problem This Research Is Designed For: This Research Will Help You: üThe CIO who depends on numerous key üClarify and define party obligations. üProtect your organization from contracts that managed services providers (MSPs) for services. üThe CIO or project manager who wants to maximize the value delivered by MSP vendors. üA director or manager of an existing IT procurement or vendor management team. favor MSPs’ interests. üNegotiate new contracts or renegotiate existing ones. üBaseline and benchmark existing contracts. üA director or manager whose IT department is responsible for MSP negotiation and administration. This Research Will Also Assist: This Research Will Help Them: üIT service managers üIT procurement üContract teams üSenior IT leadership üNavigate through MSP contracts. üUnderstand internal and external obligations. üEnsure an agreement with MSPs that will meet SAMPLE business and IT needs. Info-Tech Research Group 3

Executive summary Situation • IT organizations are becoming more reliant on MSP services and products • to meet internal and external needs. The function of IT contract review may be separated into different departments such as Legal, Procurement, and IT without any one party having a holistic understanding of business implications. Complication • Master Services Agreements (MSAs) and Service Level Agreements • • (SLAs) are tedious, and reviewers may lack the skills and experience to effectively complete the process. MSPs have a repository of contract terms and conditions that are roadtested and prepackaged, and which are often biased in their favor. With many different pricing options, it is difficult to choose services. 1. Manage your managed services providers. Added value is realized when the MSP is in tune with your IT strategies, goals, and mission. 2. Negotiate an agreement that is beneficial to both parties. The most successful partnerships are a win-win agreement. 3. Lawyers can’t ensure you get the best business deal. Lawyers tend to look at general terms and conditions and may overlook ITspecific components. Resolution • Understanding MSPs, including their roles and pricing models, will give you valuable insight into negotiating the best deal for • • your organization. Info-Tech’s contract review methodology will help you navigate the complex process of MSA contract evaluation and review all the key details to maximize the benefits to your organization. This blueprint provides guidance on catching vendor-biased terms and conditions and offers tips for getting MSPs to take on their fair share of responsibilities. SAMPLE Info-Tech Research Group 4

Don’t let MSP contracts confuse you To understand MSP contracts, it is critical to differentiate the various roles of MSPs and the value they can bring to your organization. From the ‘overseer’ as the entry point in the world of managed services to the ‘virtual IT’ office, each MSP role provides different service offerings. Key Areas of an MSA to Have Clarity On: 1 2 3 Parties and Definition • Ensure all parties are clearly defined as a verifiable legal entity. • Identify if the MSP has the right to sub-contract third parties in the fulfillment of the agreement. • Definitions and abbreviations can vary from one organization to another. Any ambiguity must be clarified. Scope of Services • Not only should this define the services provided, but also clearly detail what is NOT included. Termination and Disentanglement • As important a term clause is within a contract, the same level of detail must also define the termination and disentanglement in the case of such an event. • Insufficient review of the disentanglement clause tends to favor the vendor, leaving the client without clear obligations for the re-transitioning of IT functions. SAMPLE By dissecting pricing models we can help determine what works best for your company. Depending on the size of your organization, budget, needs, and services, a pricing model breakdown will help you decide what model fits best for your scenario. Info-Tech Research Group 5

There are many benefits of turning to an MSP The practice of outsourcing day-to-day technology management responsibilities to a third party as a strategic method for improving operations and accelerating a return on their technology investment. – TSIA Cloud Business Analytics Lifecycle Mgmt Storage & Data Backup Systems Maintenance Managed IT Services Business Continuity & DR Security & Monitoring Virtual IT Office & Staffing Laa. S SAMPLE Why Use an MSP? Help Desk Saa. S • • • Improve operations Cut expenses & labor costs Increase knowledge & skills Improve productivity Optimize workforce Improve expertise & delivery Reduce downtime Reduce capital costs Customize solutions Increase security Facilitate business advisory Info-Tech Research Group 6

Various roles of managed services differ by service offerings Overseer Evolver • Entry point into managed services. • Monitors technology solutions for the customer, and relays any issues that affect performance. • Customer responsible for operations and restoring any issues. Performer • The ‘trusted advisor’ for the client. • These ‘next-generation solutions’ typically transform into cloud or subscription offerings. MSP Roles • Issues are too challenging for the customer to address. • All operations managed by the MSP. Enhancer Transformer • Potentially largest share of managed services revenue. • Long-term relationship with customer. • Vendor as business partner. Virtual IT • Staffing support/ personnel services. • Historically were professional services. • Performance handling and optimization on a continuous basis. • Provider would access client’s IT environment, examine operations for performance issues, rectify the problem, and then hand operations back to the client. SAMPLE Source: TSIA, 2017 Info-Tech Research Group 7

Pricing models may vary among MSPs even within the same project Each MSP may have a different approach to service, making it difficult to compare pricing. Each proposal must be dissected in order to realize the business value for comparison. Common Pricing Options • • Per User Per Device Per Incident Per Service Tiered Volume Bundles All Inclusive/Virtual IT Deconstructing MSP bids to the base level is key to properly evaluate multiple bids for the same project. Achieving an apples-to-apples price comparison between offers, accurately forecasting costs stemming from changes in volume, and determining service mix are some of the other critical factors. SAMPLE Info-Tech Research Group 8

Pricing models can seem complex, but understanding the differences will lead to a beneficial agreement Pricing Model Per User Per Device Description Insights Price is based on number of users of the service or As the number of users increases or decreases, the pricing solution. This can be based on a maximum number of adjustments will be reflected in the monthly billing. Effective current users, or on the total number of users. for many types of managed services offerings. Recurring charges are based on specific number of devices covered during the duration of the contract. Monthly pricing based on the number of devices. Although this may be the simplest model for the vendor and customer to calculate and understand, it must be flexible, allowing the scaling of devices over time. The starter option: vendor remotely monitors Better suited for in-house IT organizations. Additional fees Monitoring Only performance and sends inefficiency and incident reports will be charged for solutions support. A lower cost option for a flat monthly fee. instead of opting for an enhanced managed services. Per Service/ “A La Carte” Allows client to select individual services to purchase from a menu of services. The most challenging MSA to put together. With a list of individually priced services, accurately filtering out noncritical services can cause confusion. Tiered Offers multiple ‘bundled’ packages at different prices depending on the package of services. The tiered package offerings increase based on service bundles. This is the most popular pricing model. However, with only a limited number of offerings, it is not completely customizable for the customer. Customers may have to settle with the ‘best fit’ package. Volume Bundles/ “Pick ‘X’” Combines ‘Tiered’ and ‘Per Service’ models. Customers can select three or more successively higher-priced categories each with a list of services to choose from. It may be worth purchasing additional services to ensure adequate support is provided. All Inclusive/ Virtual IT SAMPLE Without an itemized breakdown on the pricing for specific One price for all of the services provided. Fees totalled components of services, dissecting costs will be challenging for each device and for each user. and often includes paying for services that are not required. Info-Tech Research Group 9

Not all contracts serve the same purpose Your MSP will likely have various agreements, sections, or schedules within its contract framework. Non-Disclosure Agreement An agreement between both parties to not disclose information about each other to third parties. Vendor Contract A product-based or stand-alone agreement that has no or limited services associated with it. Master Services Agreements (MSAs) Constructed to protect and benefit both parties and will govern any and all future services between company and client. Statement of Work (SOW) Defines specific projects that relate to the overall MSA. Has multiple COs (change orders). Service Level Agreements (SLAs) Outlines the obligations for both parties relating to a specific service. Source: Spiceworks, n. d. SAMPLE Info-Tech Research Group 10

Info-Tech’s IT contract hierarchy IT Contract Hierarchy Non-Disclosure Agreement IT Contracts Non-Disclosure Agreement Master Services Agreement Vendor Contract Statement of Work Change Order Vendor Contract Master Services Agreement Statement of Work Change Order Reference Info. Tech’s Contract Review Tool in the blueprint Review Top Contracts to Level the Playing Field With Key IT Vendors. SAMPLE Change Order Info-Tech Research Group 11

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