IT Managed Service Agreement: What You Need to Know
There have been several times when I have run into a disconnect between what Sales is selling and what IT Support is supporting. I’m wondering if you can relate to this? For example, when joining Systems Engineering, they had 7 managed service offerings. There was some confusion between what was in the Signed Agreements and the Service Support.
Confusion Surrounding the Network Administration Visit
The biggest confusion was on the sales side of the house. The confusion was over what was included in a Network Administration visit. Executive Management wanted the visits to include the Network Administration checklist only. Specifically, all sales – including PC installs – were to be excluded. The Account Managers pushed back and pointed to the Signed Agreements which included the phrase “And all other work requested by the Customer which fits within the Network Administration visit” (or something to that effect, this is not an exact quote). Even in one of the MSP-Ignite Service Managers Peer Group monthly meetings, the discussion of what is included in an “All-In Managed Service Agreement” was brought up. Once again, the conversation revolved around PC installs.
IT Managed Service Agreements: What’s Included?
So, if the Sales side of the house can’t agree on what is included (or not) in the Services Offerings, how can the IT Service Delivery/Support side get it right? Moreover, why is this important? Without crystal clear definitions (communicated in simple terms) of what is covered by Contract or what is T&M, it will never be right. In the case of T&M, the Managed Service Provider (MSP) is giving away profit. In the case of Contract, the true profitability and value of the offering is understated. It has been pointed out to me that this lack of billing or providing more value than paid for can be trued up in Quarterly Business Review (QBRs) with the Customer. While this may be true, it is still bad data from an accounting perspective. How much of a problem is this? Besides the confusion, discussions, and Customer/Account Manager push-backs causing inefficiencies in the IT Support workflows, I have seen it represent up to 20% of the Managed Services revenue.
IT Service Managers: Here’s your Solution
Let’s cover a 5-step solution you can implement to set the stage for greater success moving forward:
The IT Service Manager needs to sit down with the Sales Manager and review the agreements so there is a clear understanding of what services are being offered, in general.
The IT Service Manager and Sales Manager together need to create a list of Customer Agreement one-offs.
A simple presentation (Excel Services Grid, PowerPoint presentation, etc.) needs to be created and distributed to everyone in the Company.
Services need to be added to the Customer Contracts in the PSA/IMS tool, so that the intake personnel and Technicians can quickly review what Services are available for that Customer and update the Ticket accordingly.
The IT Service Manager needs to monitor Ticket quality, looking for coaching opportunities, to prevent profit loss, or to see if they are understating the value of the Managed Services Agreements.
Sounds easy enough…right?
Not so fast. Even in small shops, experience has shown me that these five simple steps are not all that easy. Here’s why...
There are months of back and forth between Sales and Service before the general services offering is defined.
And then another month before it is simplified and ready to present to every Employee.
Plus a few weeks to change the configurations in the PSA/IMS tool.
And finally – you’re looking at another six months of coaching and monitoring before the new habits take place and profit increases.
A 20% Managed Services Agreement value increase of T&M profit is awesome, but keep in mind, it also increases the profitability of the Managed Services Agreements. So, the five steps - while being difficult - are well worth the time, effort, and initiative.
When it comes to the “All-In” Managed Service Agreement…
For the most part, Installations and Projects are outside the scope of the agreement. One creative way to include Installs and Projects within the “All-In” agreements is with Hardware as a Service (HaaS) offering. More than one MSP-Ignite Service Manager Peer Group Member Company is offering HaaS. How it plays out is that in addition to Managed Services support, the Customer is assured:
PC refreshes on a regular basis (typically every 3 years)
Network refreshes a year before the devices go End of Life (EoL)
This allows the Managed Service Provider to predict when the Installs and Projects will hit, include the labor cost in the agreement, and adjust staffing levels to meet the need. To the benefit of the Customer, it takes these large capital expenditures and converts them to small operating budget costs. By the way…it also makes the Customer very sticky in these times when they can jump from cloud service to cloud service with a click of a button. If you would like to learn more about HaaS, we recommend a Google search… or better yet, why not join an MSP-Ignite Service Manager Peer Group?