Agreeing to Rules of Engagement

Pacts between providers and clients set the terms of their relationship.

Download the authoritative guide:

IT managers signing on with MSPs and other service providers are starting to take those relationships personally, recognizing theyre fraught with temptations and much more complicated than a service that can be switched as easily as one would change a long-distance carrier.

With that in mind, the idea of creating what some industry pundits call a "prenuptial agreement" between service providers and their enterprise customers is beginning to emerge. More than an SLA (service-level agreement), such contracts can define how each party is to behave and what responsibilities each has should either party want to terminate the relationship.

The idea is to think like Donald Trump, according to Ray Paquet, an analyst at Gartner Group Inc., in Lowell, Mass. "Theres a big myth that its easy to switch service providers," Paquet said. "We would argue that its not. If its not easy, but its going to happen, how do you protect yourself?"

Few service providers offer such agreements. StrataSource Inc. provides a service guarantee to customers that simply states that if a customer is unhappy, it can go to another management service provider, and StrataSource will provide up to 20 hours of free consulting to aid the transition.

"Well help you with switching," said Tom Jones, CEO and president of StrataSource, in Fremont, Calif. "Its important because it takes off the table the issues of What do I get if you dont perform for me?"

One StrataSource customer who was offered the guarantee for free in midcontract was surprised to see how open-ended the clause was. "The nice thing about the service guarantee is its short and simple," said Doug Rathbun, senior IT manager at Everdream Corp., also in Fremont. "Im talking to some other ISPs [Internet service providers], and their SLAs are so convoluted. With StrataSource its easy. The measure is whether youre happy or not."

SLAs differ from prenuptial pacts in their orientation. Usually, SLAs are intended to protect the service provider rather than the customer, said StrataSources Jones: "The whole reason SLAs came up was to define the vendors obligation. But this business is not about penalties. Its about service."

Although StrataSources service guarantee is unique, there is a more common practice of defining within a service contract who is responsible for what costs when a contract is terminated prematurely. "The customer is incurring an expense to establish a service. If we cease to provide it, wed have to reimburse the expense," said Scott Windemuller, general manager at ServOn Inc., in San Francisco. "Similarly, if they want to cancel six months early, we have a mechanism in the contract to gain a percentage of the remaining value of the contract to cover costs. We may have bought hardware to facilitate the service."

New ServOn customer Bravenet Web Services Inc., of Parksville, British Columbia, went beyond the financial considerations to add in a window of time for making any move to another provider. After a not-so-successful transition from Genuity Inc. to ServOn, which is providing co-location facilities for Bravenet servers in addition to monitoring and managing the servers, Bravenet Chief Technology Officer Brad Knorr chose to require a 60-day grace period. "My biggest concern was not to be left with a get out in five days," Knorr said.

Other transition issues that IT should consider include establishing a backup plan from the start that provides for operational support during the transition, establishing communication between the old and the new MSP as well as with the customer during the transition, establishing the ability to run parallel services on the customers infrastructure during the cut-over, and creating well-defined integration points, Gartners Paquet said.

In multiyear service agreements, its also important to include exit clauses so that if the MSP doesnt perform, execute or scale or is somehow disruptive to the customers business, the parties can terminate the contract, he added.

Specific to MSPs is an issue related to gathering data on the customers infrastructure, which is necessary for monitoring and reporting. Such data can become quite extensive and valuable to third parties, Paquet said.

Although its human nature to delay dealing with negative issues in a new relationship, spreading the risk equally between the service provider and the customer is one way to create incentives to make it work. "Nobody wants to enter a contract thinking about what happens if we dont make it. You are immediately creating an awkward situation for each party," ServOns Windemuller said. But providing for financial penalties should either party want to terminate early "is more of an incentive to keep providing the service and for them to stay with us," he said.

At days end, it can still come down to people and money. "You can contract as much as you want and have it signed by 18 million people, but in the end, a contract is only as good as how much you can afford to enforce it," Bravenets Knorr said.