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The Use of Pricing Schedules in Managed Service Provider Agreements

By Stephanie Robinson

Many managed service providers incorporate their pricing and payment terms into their Master Services Agreements or their Service Level Agreements. While it is important to ensure that the financial arrangements are clearly delineated in writing to ensure that everyone?s expectations are clear, it is equally important to allow Managed Service Providers (?MSPs?) to adjust their prices when circumstances justify an increase. One way to allow for flexibility is to extract the pricing information from the Master Services Agreement or Service Level Agreement and include a pricing addendum to the agreements. With a separate pricing document, an MSP can adjust the price without revising an entire MSA or SLA. Because many agreements span several years, MSPs should protect themselves by reducing the possibility that a price increase will result in a renegotiation of all the MSP agreements. For example, a managed services client who is presented with a revised agreement containing new pricing and a description of services identical to the original agreement may insist on renegotiating the scope of services provided. However, if the original agreement contains a provision allowing for periodic increases in pricing, and if the pricing document is separate from the core agreements, the MSP may be able to increase its prices, send an updated pricing addendum, and avoid renegotiating the terms of the rest of the agreement. It is important to consider whether to allow your clients to terminate the agreement in the event of a price increase. Many MSPs want to use price increases as a way to jettison underperforming clients. To achieve that objective, these MSPs allow their customers to terminate the agreement if the MSP increases the price. Others want to have the right to increase the price by a certain percentage without the possibility of cancellation. Like other components of an agreement, the pricing provisions should be specifically tailored to meet the business objectives of each MSP. Experienced counsel can assist MSPs with using documents to reduce risks and increase client satisfaction.

Full post as published by Business and Technology Law on May 14, 2008 (boomark / email).