Originally published by Jim Chester.
5 Tips in Drafting an MSP Agreement
A Managed Services Provider Agreement (“MSP Agreement”) represents the understanding relating to a IT service provider’s work for a client. A clear and comprehensive MSP Agreement can prevent disputes between clients and service providers caused by misunderstandings or differing expectations.
Key Provisions of an MSP Agreement
Although every professional services transaction has unique nuances and challenges that must be adequately addressed in the MSP Agreement, some key areas of an MSP Agreement include: choice of law and forum; scope of work; confidentiality; independent contractor relationship; and ownership of intellectual property.
1. Choice of Law/Forum
An MSP Agreement should specify the choice of law that will govern the interpretation of the contract in the event of a dispute. In addition, selecting a specific location for courts to decide disputes can often facilitate a quicker resolution. Alternatively, if arbitration is preferred to a lawsuit in court, this election should be provided in the MSP Agreement.
2. Scope of Work
One of the frequent sources of conflict between service providers and clients relates to the work that is to be performed, as well as how and when it should be delivered. Thus, a detailed scope of work (often referred to as a statement of work or “SOW”) can help avoid confusion and misunderstandings by clearly defining the service provider’s deliverables, deadlines, and benchmarks, as well as when payments are required.
3. Confidentiality
During the course of the MSP Agreement, the service provider and client will likely have visibility to the other party’s proprietary materials and information. The MSP Agreement should require each party to keep this information secret and should prohibit the parties from disclosing or using the other party’s confidential information.
4. Independent Contractor Relationship
The MSP Agreement is an independent contractor agreement. However, to avoid any confusion between the parties, and to prevent confusion about the relationship by third parties, the MSP Agreement should clarify that the service provider is an independent contractor, and not an employee, agent, or partner of the client.
5. Ownership of IP
The service provider will typically use its own intellectual property (IP) in providing the service and may also need to use or access the client’s IP. The MSP Agreement should clarify ownership of each party’s IP, as well as the limited license rights that they are granting to each other in connection with the MSP Agreement. In addition, new IP may be created as the result of the services, and the parties should pre-determine who is the owner of this new IP.
Final Thoughts on MSP Agreements
Of course, these are just a few of the key issues that an MSP Agreement must address. Every situation is unique, and the MSP Agreement should be drafted in light of the specific nuances and concerns of each transaction. As such, the MSP Agreement requires careful review and drafting by experienced MSP Agreement attorneys.
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