First, let us just say that we will never lock you into a long-term contract. You will always have the option to cancel your contract after 30 days no matter what.
However, this isn’t the standard policy for all IT service companies. That’s why it’s so important to read your contract carefully.
The Managed Services Agreement is a contract that binds the service provider’s level of service between them and your business. It includes what’s provided in terms of:
When things slow down, and revenue streams do as well, you typically respond by reducing expenses. What would happen if your IT Managed Service Agreement doesn’t allow you to cut back on services or cancel your agreement? You’ll still have to pay for what you no longer need for the term of the contract.
In most cases, the contract terms will benefit the IT company, not your business. If your business has slowed down, a term contract will still lock you into paying for the services for the period of time that you signed up for.
However, if you need to increase the services you’re receiving, the IT vendor will happily let you pay more for them. Seems pretty one-sided, doesn’t it?… It is.
Before you sign a new contract with a Managed Service Provider carefully consider all the terms. Here are 8 things that you should consider:
1. A Business Downturn Clause
It’s easy to sign up for contracts but not so easy to get out of them. Make sure the agreement includes a Business Downturn Clause. If your business slows down, a Business Downturn Clause permits you to reduce your original commitment in terms of rates, services and contract length. It can also include migrating to a new service or solutions. You want to ensure is that the language in the contract doesn’t restrict you for business downturns beyond your control.
2. Any Wording That Limits Your Freedom
When you sign a contract, you will lose the freedom to switch to another IT vendor who offers a better deal. Plus, if you plan to move out of the area, you may still have to abide by the contractual obligations. Many IT service providers include language stating that just because you move out of the service area, this doesn’t nullify the contract.
3. No Negotiating Prices
IT Managed Service Providers have you sign a contract so they can lock you into a payment agreement even if their prices change. This means that you can’t take advantage of price reductions. The savings you make when signing the original contract are negated if you’re prohibited from taking advantage of promotions the IT vendor offers its new customers.
4. Read The Fine Print
Service contracts usually include extensive terms and conditions that are noted in fine print (so they’re hard to read). Always read the fine print before you sign a Managed Service contract. You may have signed up under an introductory promotion that ends after a few months. Make sure you know what you’re getting for your money.
5. Review Cancellation Clauses
If you have to cancel your contract before the term expires, you may have to pay a termination fee. There’s no standard price for this. You don’t want to be surprised if this happens. The Managed Service Provider will typically include contract language that commits you to one or more years. They will specify what happens if you breach the contract before the end of the agreement term. Make sure that you understand what you’re signing up for.
The contract should allow you to assign rights under the agreement if they sell their IT service company. Will your contract be taken over by a new IT provider? Make sure you understand what this means. It could affect the value of the services you signed up for. Make sure the contract says that the IT Vendor doesn’t have the right to assign or subcontract any of their obligations under the agreement. Unless there’s a clause defining this, the contract is presumed to be assignable. Also, make sure the contract states that the IT company cannot assign or subcontract any of its obligations or duties without your prior written consent.
7. Metrics For Determining Fees
Managed Service Providers typically offer pricing models based on different metrics like the number of devices, number of users or number of servers. Make sure this is clearly defined in the pricing terms before you sign.
8. Attorney Fees
The contract should specify that in the case of a legal dispute the non-prevailing party must pay all costs and expenses that are incurred by the prevailing party. If you win a legal case over the IT vendor, you have the right to recover your costs and expenses paid, including legal costs.
When you sign a contract with your Managed Service Provider, you should probably go for the shortest term possible to ensure they provide the services you require. Reputable IT Service Companies like ours will always offer you a 30-day cancellation. If they don’t, it might be time to shop around for another.
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