MSP Flexibility in Contracts

Posted 8.18.2020

Talk to any MSP today, and they likely will tell you they are quite busy. Managed services clients are keeping their MSPs busy with pandemic reopening and other operational changes impacting IT.

Still, MSPs should not get too cocky and start thinking about adding lengthy terms to their service contracts. Here’s why.

New Managed Services Clients

I believe there are new managed services clients being born every day. The pandemic has caused many businesses and organizations to rethink how they operate and how they utilize IT. Break-fix service providers are not in a position to provide ongoing support, maintenance, and security, partly why MSPs are staying so busy when reactive IT providers have not.

New managed services clients want flexibility. The pandemic has taught them that long-term commitments should be avoided. Being agile and flexible is a virtue in today’s business climate. So, MSPs should keep that in mind.

Contract Terms Do Not Impact MSP Valuation

We have discussed in previous articles on this site that MSP valuation models have changed in recent years. Specifically, MSPs no longer need multi-year service contracts to prop up their valuations. Instead, what matters most is the length of your relationship with the managed client. That history of working with a customer will offer greater assurance around the MSP’s value than the agreement’s term.

Being Flexible Does Not Mean Free

If you are using monthly agreements, there are still many ways to negotiate with clients and still protect your managed services practice. Managed services relationships often begin with project work. Project fees can be negotiated in several ways, including how they are paid (i.e., bundled with the monthly maintenance fees), service level requirements, and other techniques.

If you are an MSP still using multi-year agreements, that’s ok. There are always clients who prefer to have multi-year contracts to secure pricing levels at fixed amounts to budget accurately over a more extended period. If that sounds like your client base, then don’t be afraid to use multi-year agreements.

MSPs who operate with a variety of pricing and agreement models will be more likely to appeal to clients from a broader spectrum of service and market verticals.

Tags : break-fix,monthly agreements,service agreements

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