Service Level Agreement for Managed IT Service Providers

In a dynamic and highly competitive IT services industry where companies can choose from hundreds or even thousands of managed service providers (MSPs) to cater to their end-user systems and IT infrastructure requirements, it is crucial for MSPs to have well-documented principles and policies to guide the successful delivery of service.

Before finalizing a business partnership, it is important that the client and the company clearly define the ultimate goals that the collaboration should achieve, and this is precisely where the role of a Managed Services Service Level Agreement or MSP agreement comes into play.

Defining Managed Services Service Level Agreements (MSP SLAs)

The most straightforward way to define an MSP agreement is that it is a guarantee, which you as a managed service provider offer the customer. An MSP SLA is, therefore, a legal document that outlines your obligation, commitment, and responsibility towards the customer.

In essence, the MSP agreement could be deemed as the foundation of the business partnership because its components dictate what the client can rightfully expect from you. Think of an MSP SLA as an effective communication tool to bridge the gap between customer expectations and quality of service delivery. An MSP agreement is here to help you!

The Reasons Why You Need an MSP SLA

Customer-service provider relationships are unpredictable at best. Some days you are riding the high horse as everything goes on point, and then there are days when you think to yourself “Could this get any worse?” Imagine that you receive a complaint call from your client and you order your team to get the issue fixed immediately, and they successfully do. As you call the customer back to report this good news, you are astonished to hear that they are extremely dissatisfied with your slow response time. Or here’s another scenario — What if the customer’s IT infrastructure is attacked by an external party and they expect you to back up their data (the only issue)? You never agreed on the scope of backup services, and you have no clue about what the client wants to be backed up and how they want it automated.

What do these scenarios tell us? They tell us that an MSP SLA is fundamental because:

• It defines partner obligations: An MSP agreement defines elements such as the scope of work, service offerings, and sets response time goals. Once these aspects are agreed upon, a client cannot wrongfully accuse an MSP of having a slow response time to an issue or expect them to complete more tasks than discussed because an MSP SLA document covers everything.
• An SLA is a testament to professionalism: An MSP agreement will help you stand out from competitors that may not have this document on hand. (This especially applies to smaller MSPs that seldom engage in this benchmark practice.) Having an MSP SLA when your competitors do not will build the client’s trust in your service.
• An MSP agreement is here to protect you: By setting customer expectations and clearly defining how the business relationship is expected to progress, MSPs can safeguard their interests against pestering clients by strictly adhering to what the MSP agreement entails. Moreover, MSP SLAs can be used to support your stance during legal disputes (for example, when measuring your performance against agreed-upon metrics).

Further reading The Importance of Legal Services to MSPs

The Building Blocks of Managed Services Service Level Agreements (MSP SLAs)

MSP SLAs can be customized to address customers’ unique requirements. However, an MSP agreement that promises to remain effective in the long run must be made up of the following components:

• The Scope of Services: This comprehensively defines the product/services that the MSP shall offer to the customer in addition to the support which will be rendered to them in terms of human resources. This section must also present a detailed overview of the servers and software systems that come under the agreement to avoid issues in the future.
• Service Availability: This area of an MSP agreement defines how service outages will be managed during scheduled maintenance and unforeseen circumstances. It is recommended that customers and MSPs come up with service availability goals at this stage. Moreover, operating hours and response and resolution goals should be mutually agreed upon, depending on the severity of issues. (As an example, immediate response in case of shutdown as a result of a critical issue should stand at one to two hours.) However, other situations that are classified as important or informational can have response times of four hours and one business day (respectively).
• Key Performance Indicators: Having a set of performance metrics in the MSP SLA template makes it possible for MSPs to evaluate their services in the light of customer expectations, and also safeguards them from unreasonable demands that may emerge in the future. These indicators include but are not limited to MOS scores, down devices, downlinks, capacity violations, and network errors.
• Legalities: An effective MSP agreement must address issues such as third-party claims and indemnification policies that may be needed in case of any legal disputes.
• Customers’ Obligations: To ensure the smooth functioning of customer relationships, an ideal MSP SLA should cover customers’ responsibilities to the service provider as well. (For example, customers must comply with reporting timeframes when informing service providers about any incidents so that corrective action can promptly be taken.)

Further reading SLA vs. SLO vs. SLI

Termination Policy

An MSP SLA serves as a guiding document if either of the two parties intends to terminate their contract. A well-defined termination policy of an MSP agreement highlights the scenario wherein the agreement stands void while defining how the customer or the MSP can initiate termination (for example, by submitting a written notice in advance). It also covers the MSP’s liability when the agreement is terminated (for instance, the service provider shall not be legally responsible to hold the customer’s data backups in case backup services have been terminated).

Conclusion

Managed Services Service Level Agreements protect and safeguard the interests of the parties involved in a business relationship. Regarded as a best practice across the industry, an MSP SLA can act as a driving force in organizational success by assisting the establishment of long-term and mutually advantageous customer partnerships.