Managed Services Agreements

What is a Managed Services Agreement (MSA)? A complete guide

Running a business is complicated, considering the liabilities or misunderstandings that may arise when partnering with vendors or service providers. Therefore, your long-term business goals need suitable contracts and agreements to maintain friendly business relationships with your clients.

Agreements and contracts are equipped to maintain a relationship of trust and transparency between the client and the managed service provider. Like them or not, all this paperwork is designed to help you smoothly sail through any tough times your business might face. In an unprecedented situation, your managed and MSP master service agreement will be the most important tool at your disposal for making honest and safe transactions.

So, let us understand a few important aspects of managed service agreements and MSP master service agreements, and find out how MSPs can structure an effective MSA.

What is an MSP contract or a Managed Service Agreement?

An MSP contract, also known as a Managed Service Agreement (MSA), is a formal agreement between a Managed Service Provider (MSP) and a client that outlines the scope, responsibilities, and terms of IT services provided. This contract serves as the foundation for a long-term working relationship and ensures both parties clearly understand their obligations.

When the contract is drafted, certain factors need to be kept in mind, like the response time, liability protection, the basic payment structure, and more. There must be a clear definition of the specific services that you are willing to provide to the client.

Drafting an MSA can help you create a proper framework to facilitate a profitable business through your MSP’s services.

What is a Master Service Agreement?

A Master Service Agreement is an agreement or a contract between an MSP and their client that outlines a flexible time frame and framework for completing an assignment. It also includes the decisions that need to be taken along the way for entering subsequent agreements in the future.

An MSA establishes the foundation of the relationship for the work that needs to be carried out for the benefit of their client. It is efficient in ensuring that the work is progressing as planned. It is equipped to solve any subsequent problems or issues that may arise in the future, during the course of a project.

Master Service Agreements also discuss the basics of negotiating and crafting the MSP contract. It gives a clear outline of the best possible practices that an MSP will put to use to achieve the desired goal. The agreement also takes into consideration the most common problems that may arise during the course of the project and sets guidelines on how they should be resolved.

A well-drafted Master Service Agreement can help prevent a litigation scenario, hence saving precious time, money, and energy for an MSP.

What is the difference between Managed Service Agreements and Master Service Agreements?

When drafting an agreement with your client, one should keep in mind that the Master Service Agreement is different from an MSP contract/Managed Service Agreement.

A Master Service Agreement is designed to serve future transactions and agreements between the MSP and its client. It is crafted to set expectations regarding future business opportunities by agreeing to comply with regulatory norms that will remain constant for all business dealings between the two parties.

A Managed Service Agreement, on the other hand, is an agreement between an MSP and its client that establishes the time frame and work system for completing an assignment.

What are the benefits of Managed Service Agreements (MSAs)?

A Managed Services Agreement (MSA) is more than just a contract, and it is a clear and structured agreement that helps both the MSP and the client work together smoothly and with confidence. Here is why MSAs are important:

• Set clear expectations: MSAs define the scope of work, service levels, and responsibilities, reducing confusion and ensuring both parties know what to expect.

• Minimize disputes: With agreed-upon terms in writing, there is less room for misunderstandings, which helps prevent conflicts over service delivery, costs, or timelines.

• Establish accountability: Service Level Agreements (SLAs) within the MSA hold the MSP accountable for performance metrics like response times and uptime guarantees.

• Provide legal protection: An MSA acts as a legally binding document that protects both parties in the event of a disagreement, breach, or failure to deliver.

• Support long-term relationships: Clearly defined terms and renewal clauses help foster trust and encourage ongoing collaboration between the MSP and the client.

• Ensure regulatory compliance: MSAs often include clauses related to data protection and compliance with laws like GDPR, HIPAA, or industry-specific standards.

• Define financial terms: The agreement outlines pricing, billing schedules, and payment terms, helping avoid unexpected charges or billing disputes.

• Manage risk: By addressing liability, indemnification, and security responsibilities, MSAs help minimize risk for both the client and the MSP.

• Guide service changes: MSAs include change management procedures, making it easier to adjust services as business needs evolve without disrupting the relationship.

• Improve operational efficiency: A structured agreement streamlines communication, service delivery, and escalation processes, leading to smoother day-to-day operations.
  

What are the key components of a Managed Services Agreement?

To ensure clarity, protection, and performance, an effective Managed Service Agreement (MSA) includes several essential components:

• Scope of services: This section defines the specific IT services the MSP will provide, such as network monitoring, cybersecurity, help desk support, cloud management, and data backup. It also outlines any services that are excluded or available for an additional fee. Clearly stating the scope helps avoid misunderstandings and ensures both parties agree on what’s included.

• Service Level Agreements (SLAs): SLAs establish performance standards and expectations, including guaranteed response times, system uptime, and issue resolution windows. These metrics ensure that the MSP delivers consistent and reliable service while also offering the client a way to measure performance.

• Roles and responsibilities: This part clarifies what the MSP is responsible for and what duties fall under the client's control. For example, the MSP may handle network security, while the client manages internal user policies. Defining roles helps prevent overlap, gaps, or confusion in service delivery.

• Pricing and payment terms: Here, the agreement outlines how the client will be billed, including pricing models (flat-rate, tiered, or usage-based), billing frequency, and payment due dates. It may also cover late payment penalties and conditions for pricing changes. Transparent pricing terms help maintain trust and avoid billing disputes.

• Term and termination: This section specifies the contract’s length, renewal terms, and procedures for termination. It includes the notice period required, early termination clauses, and potential fees. A clear exit strategy protects both parties and allows for a smooth transition if the relationship ends.

• Confidentiality and data security: Protecting sensitive information is critical, especially when dealing with client data or systems. This section outlines how data will be handled, stored, and protected. It may also reference compliance with industry regulations such as HIPAA, GDPR, or PCI-DSS.

• Liability and indemnification: This component limits each party’s legal liability and explains who is responsible in the event of data loss, system failures, or third-party claims. It’s designed to reduce legal risks and clarify how damages or legal costs will be managed.

• Change management: A change management clause outlines the process for requesting and approving modifications to services. This ensures that any changes, whether due to business growth, new technologies, or evolving needs, are handled in an organized, documented manner.

• Dispute resolution: This section provides a formal process for resolving conflicts, including mediation, arbitration, or legal action. It may also designate which jurisdiction’s laws will govern the agreement. Including this clause helps resolve issues efficiently without escalating to costly legal battles.

• Contact and escalation information: This final section lists the main points of contact for both the MSP and the client, along with an escalation path for addressing urgent or unresolved issues. Having clear lines of communication is essential for smooth operations and quick problem-solving.

Additional read: How MSPs can finish strong every year

What is a Service Level Contract/Agreement?

The SLA or the Service Level Contract is crafted in a way that sets the relationship’s tone between the service provider and its client. The SLA is inclusive of a well-defined set of deliverables and their delivery guidelines that the vendor has agreed upon.

SLAs or Service Level Contracts are different for different MSPs. However, a traditional MSP Service Level Contract must include features like compliance with regulations, basic response time in the face of unforeseen circumstances, and so on.

Managed Service Agreements or MSP contracts usually contain service level contracts in their clauses. MSPs often use the term Service Level Contract or SLAs to refer to the blueprint of the actual MSA that is to be presented to their client.

What is the difference between a Managed Services Agreement and a Scope of Work or Statement of Work?

A Managed Services Agreement (MSA) is a broad contract that sets the overall terms, responsibilities, and service levels for an ongoing relationship between a provider and a client. It covers general rules like pricing, liability, and communication.

A Scope of Work (SOW) or Statement of Work, on the other hand, is a detailed document that defines specific tasks, deliverables, timelines, and requirements for a particular project or service under the MSA.

Simply put, the MSA sets the foundation for the partnership and how services are managed broadly, while the SOW defines the exact work to be performed under that agreement. Together, they ensure clarity and structure for both ongoing support and project-based work.

Why does an MSP need a Managed Service Agreement/MSP contract?

A good MSP should be clear about their offerings and outline their services in a well-written agreement. An MSP contract makes it easier to draft a solution path and describe the working areas of your business relationship with the client. The contract is also designed to set realistic expectations for the client. They also document any kind of legal formality that shall require attention in due course.

• Contracts that are written well can also make your business dealings with the client easier.

• A good MSA can not only negotiate the terms and conditions of your period of payment but also control the mode through which you want to get paid.

• They can handle the renewal and termination of your contract with the client.

• An MSA manages the overall relationship between the client and the service provider.

How to write a Managed Service Agreement (MSA)?

Drafting an MSA can be tricky. Many technicians and IT MSPs are still now aware of how to draft and design a proper MSA.

Let us understand this with an example of managed service agreements.

An ideal MSA contract template should consist of:

• Proper service descriptions

• Basic service level contract response period

• Requirements to avail your MSP’s services

• Proper terms and conditions

• Repetitive ACH payment authorization

This MSA service template is considerate of the most crucial aspects on which you will build your relationship with the client. Any good MSP contract should include factors like payment date for your work, work policies, and their subsequent renewals, and what happens when there is an end of the business relationship between you and your client.

Your MSA can also be used as a sales tool. A good MSA should have a well-defined checklist of products and services that you are willing to provide your customer. Before even reading the full contract, the customer will have a proper understanding of what they are signing up for with the agreement.

An MSA or MSP contract should be designed well to protect your business from any form of exploitation. MSAs are meant to set the right expectations of your business with the client.

The above example of a managed service agreement template should help you draw a comparison between your present MSA contract and an ideal MSA contract.

How to draft a Master Service Agreement?

A master service agreement is designed to provide clear parameters for performing the future work established in the contract. It is very crucial to draft a master service agreement by keeping in mind some important functional areas.

• Scope of services: This helps the customer understand what kind of work they must expect from their vendor.

• Payment and price options: This helps both sides to agree on a common price, payment schedule, and mode of payment.

• Resolving disputes: This helps understand how the vendor and the client will act in a situation of dispute. Both sides can negotiate litigation costs and find common grounds to facilitate quicker resolution of disputes in case of contractual failure.

For instance, problems can be solved by appointing a subsequent mediator who has been agreed on by both parties. The vendor and the client may also reach a common ground of dispute resolution through arbitration, which is an inexpensive alternative when compared to going to court.

• Geography: Under this clause, both parties may agree on which geographic location their employees will be working.

• Allocating risks: The new agreement may impact the pre-existing contract between the actors involved. This term helps outline the risks that each party must assume before entering a new contract.

• Intellectual property rights: Outlines the necessary regulations and ownership details, like copyright and patent information.

• Change of orders: This involves a detailed description of the process that both sides should follow to make necessary changes to a contract. Traditionally, these changes are made in the form of written guidelines either for the scheduled work or the subsequent changes.

• Provisions for indemnification: These provisions relieve one party from being held responsible for the damages.

• Scope of insurance: Defines the adequate amount of insurance that both parties should maintain.

• Security clause: Defines the minimal amount of security that both the vendor and the client should maintain.

• Human resources: Provides the necessary guidelines for the minimum amount of human resources required by both parties.

• Termination of contract: It involves the clear definitions of terms on which a party may choose to dissolve the contractual relationship. The clause mentioned under these headlines also defines which party is obliged to pay for the damages in case of a contract failure.

The two most important kinds of termination are termination of cause and termination of convenience.

• Termination of convenience defines the terms when the client wants to exit the agreement for some reason.

• Termination of cause defines the guidelines that must be followed when the vendor does not wish to abide by the duties and obligations that had been agreed upon in the MSA.

• Legal venue and term: These define the duration of the contract and the location of arbitration in cases of dispute.

• Warranties and representations: These state the fact that is written in the agreement. Representation is the reason that made the client and the vendor enter the agreement in the first place. Warranties guide the representations in the future.

• Quality standards: Under this clause, both parties agree on the standard of acceptable work. Not maintaining work and quality standards often gives rise to disputes.

• Confidentiality and privacy: The vendor and the client agree not to share information with a third person.

Other than the areas mentioned above, an MSA can define a few other areas that should be focused on. This may include areas like business ethics, property and network access, corporate social responsibilities, purchase orders, risk allocation, statements of work, purchasing agreements, limitations of liability, and much more. This way, both the MSP and clients can save valuable resources in negotiations.

MSAs are effective contracts that require the agreement and understanding of both parties involved. A good MSA can comprehend future disputes and provide necessary assistance to resolve them. This saves the vendor and the client a lot of money and time.

When should an MSA be revised?

 You must revise your contract when you have fallen out of the pre-set expectations previously mentioned in your MSA. This may include factors like your service offerings to the customer, failure of payment terms, or the very language of the contract. The language that is used in drafting the contract provides security and protection to your managed services. Therefore, keeping your overall business protected.

Nobody wants a bunch of differential agreements floating all over in ways that you are not sure about, factors like which client is under which terms and conditions. An annual review of your MSA can prevent any such misunderstandings between you and your client. You should emphasize changing any terms that negatively impact the business relationship with your client

What are the Managed Service Deliverables or Managed Service Scope of Work?

The deliverables or the scope of work may vary from one MSP to another. However, there are certain core deliverables that every managed IT service must provide.

• Remote management and monitoring services: Often, situations requiring immediate attention need services from the remote management and monitoring section of an MSP. This gives an increased uptime to the clients. Many Remote Management and Monitoring (RMM) services don’t even require human intervention and can be solved remotely. This saves a lot of time and money. These activities may include anti-spam updates, antivirus updates, path management services, disk optimization, operating system applications, backup updates, and backup monitoring. RMM can help your MSP focus on the ability to provide better support to a huge number of clients. RMM also cuts short the number of staff that you would otherwise need to hire, hence saving your time and money.

• Service desk: MSP offerings should also be inclusive of any kind of desk operation. The service desk assists in providing effective problem resolution and remediation services to the clients. Service desks are the point of contact between the client and the managed service provider. The requests by the clients are identified with their subsequent categories at the service desk and then documented in the trouble ticketing system. The resolution is determined after the necessary escalation and troubleshooting. Service desks can resolve the issues of your customers remotely and save time by not having to make an on-site visit to resolve the issue. A lot of time, money, and energy is saved by the service desk as the response and resolution time is reduced. This can also help you meet your customer satisfaction goals.

• Vendor management: This involves the MSP’s role in building relationships with the customers and their vendors. This allows the client to focus on their business without having to worry about their vendors. This service can create long-lasting relationships between the MSP and its clients. The service desk saves the time and energy of the client by dealing with their numerous vendors. MSPs can either work directly to find a quick resolution by remotely communicating with the vendor in question or they may schedule on-site visits with the vendor to resolve a pending issue.

• Cloud and security infrastructure: If you are looking to create a distinction for your MSP services, then upgrading security and leveraging a cloud-based infrastructure is something you should focus on.

Managed services related to security can help protect your client from cyberattacks. You can choose to build in-house or partner with an agency to provide cloud and security services to your customers. Many MSPs have developed cloud services built around Microsoft Azure, AWS, and Google Cloud. These services help facilitate quicker migration, cost optimization and application modernization.

MSPs also offer disaster and backup recovery services to their customers. This, alongside cloud and security infrastructure offerings, is usually included in a much bigger portfolio of services and products. All of this can also be included within the RMM professional software automation services of the MSP.

What are the common mistakes to avoid when drafting an MSA?

Creating a Managed Services Agreement (MSA) requires careful attention to detail to ensure a fair, effective, and legally sound partnership. Here are some key pitfalls to avoid:

• Failing to clearly define the scope of services can lead to misunderstandings about what is or isn’t included.

• Overlooking or leaving out Service Level Agreements (SLAs), which are essential for setting expectations on performance and response times.

• Using vague or overly broad language that can be interpreted in multiple ways can cause disputes.

• Not specifying roles and responsibilities makes it unclear who is accountable for what.

• Ignoring data security and compliance requirements, especially for industries subject to regulations like HIPAA or GDPR.

• Leaving out clear pricing structures and billing terms can result in payment disputes or hidden costs.

• Failing to include a termination clause makes it difficult for either party to exit the agreement smoothly.

• Skipping over change management procedures, which can lead to confusion when services or needs evolve.

• Not addressing liability and indemnification potentially exposes one or both parties to unnecessary legal risk.

• Forgetting to include dispute resolution methods, which can make resolving issues more difficult and costly.

What are the key clauses to include in a Managed Service Agreement?

Whether you adopt a legal template or build from scratch, your managed services contract should contain specific core terms so expectations are clear, risks are managed, and you get paid without issues.

Contract management with SuperOps

SuperOps provides a smart and efficient contract management solution built specifically for Managed Service Providers (MSPs). It streamlines the entire contract process, from creation to management, helping MSPs stay organized, reduce manual work, and ensure contracts support their business goals and profitability.

Here are some of the standout features SuperOps offers:

• Customizable Contract Templates: Easily create contracts that fit each client’s unique needs. Tailored templates help clarify services, pricing, and terms, reducing confusion and strengthening client trust.

• Flexible Contract Types: Whether it’s recurring agreements, usage-based billing, one-time projects, or time-and-material contracts, SuperOps supports a variety of contract models to suit different service offerings.

• Seamless Service Catalog Integration: Direct integration with your service catalog makes adding services and products to contracts quick and consistent, speeding up contract creation without errors.

• Automated Billing and Invoicing: Billing becomes hassle-free with automatic invoice generation based on contract terms, work logs, and service usage. This reduces administrative tasks and helps keep payments on track.

• Real-Time Profitability Insights: Interactive dashboards give you a clear picture of technician costs, client margins, and overall service profitability, helping you make informed decisions to grow your business.

• Centralized Client Management: Access all client details, payment statuses, invoices, and communication history in one place. This centralized view makes managing contracts and client relationships easier and more efficient.

Ready to streamline contracts and boost efficiency? Try SuperOps today.