Pros and Cons of a MSP Agreement

What are the pros and cons of managed service agreements for SMB’s?

In today’s world of ever-changing IT offerings and services, more and more SMB’s are moving to using a Managed Service Provider (MSP) to take care of their IT needs.  However, if a SMB doesn’t do their homework when choosing an MSP, unforeseen problems may develop down the road.

Pros of SMB’s having a managed service agreement

  1.  Your MSP assumes responsibility for the smooth, efficient operation of company technology, allowing your employees to focus entirely on realizing your business’s goals.
  2. Cost consistency.  Easier budgeting and improved cash-flow, through a predictable, monthly cost for technology support and consulting.
  3. Improved bottom line.  A good MSP will raise performance levels of the SMB, through an improved process of technology services delivery.
  4. Overall cost reduction over time.  Implementing the MSP “company way” and best practices reduces both apparent and hidden costs of technology management and TCO (total cost of ownership).
  5. Scalability.  Service level agreements (SLA’s) adjust cost to the SMB relative to increases or decreases in employees and technology.

Cons of entering into an SLA, or managed service agreement

  1. When there are multiple technology vendors — for example, if one vendor manages applications/software and another manages infrastructure — a blame game can erupt when a difficult-to-diagnose issue arises within the SMB’s technology operation.  (One possible solution to this is to find an MSP which has the staff with the expertise to handle as many aspects of your business technology as possible, eliminating the possibility of mutual finger-pointing that can develop when something goes wrong.)
  2. An MSP may not understand all of a company’s pain points.  (The solution to this problem is to make sure the MSP has a dedicated technology consultant on staff who meets frequently with the business owner and manager.  The technology consultant is familiar with obstacles that arise to create pain points in an organization and will be proactive in seeking them out.)

Tips on Negotiating a managed service contract

  1. Make sure all the particulars that were agreed upon during the decision-making process are included in the contract.
  2. Make sure that the vendor uses a ticketing system to track issues and that it is available to you, not just to the vender.
  3. Make sure to agree on the particulars about support:  What is the recovery time objective?  What is the recovery performance objective?
  4. Discuss in depth with your proposed vendor – what is best for your unique business needs, fixed or variable pricing and why?
  5. Other considerations to cover:  subcontractor approval, out of scope work, benchmarking (cost negotiation during agreement lifetime), termination and migration.

Once you have found the right MSP and negotiated a fair contract, you are ready to take the next step and enter into the agreement.  Remember, above all, open and clear communication is the secret to a productive and successful business collaboration.  As in so many areas of business performance, good communication is the key to success.

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