Picture this. You’re about to traverse a wide stretch of snowy and icy terrain. It’s your first expedition in this type of weather. The wind is howling. You’ve been walking all day and your group is traveling well. Not much longer and the tent will be pitched and you can rest. But first, the snowy and icy terrain must be crossed. It’s only now that you realize the essential piece of equipment you need to help you across this terrain – your ice axe - is … at home in your garage!
If only you had checked everything a bit more carefully. You thought you had everything, but obviously not!
Is this how you check agreements received in from customers? You read through them, you think you have found all the risky items … but are you sure about that? Is there a way you can deal with this yourself, quickly, and get more comfortable about finding risk areas?
When do Managed Service Providers Receive Agreements from Customers?
Mostly this happens when your customer is a larger business that wants to standardize the basis on which they contract with every supplier they deal with.
It’s not often that small customers will issue you an agreement of their own, although they might.
The agreement from the customer is likely to be a Master Services Agreement of some description. The customer wants this to ‘sit over’ your Managed Services Agreement. The customer says ‘You need to sign our Master Services Agreement before we can proceed with you’. Sound familiar? (If they are big enough, they might have their own managed services or other types of agreement as well. If that’s the case, they will expect to use their own managed services agreement instead of yours; the principles in this article apply to those other customer-issued agreements as well.)
Yes, go ahead and read the customer’s agreement (and find risk areas)
Read through the agreement. With your experience you will likely find some areas that could cause difficulty.
Customer’s agreements are often difficult for managed service providers. The customer does not know your business like you do. They don’t know your methodology or processes. If it’s a Master Services Agreement they send you, it’s not going to have specifics about the managed services you will be supplying. And then you have the Master Services Agreement and your Managed Services Agreement or schedule, creating potential inconsistencies (this risk of inconsistency is a topic for another article, I’m just mentioning it here).
Your customer may not be open to negotiating their Master Services Agreement. But it is still important to read it and to identify all risk areas. If you proceed, you will at least go in with knowledge of those risks.
But is reading it enough to identify risks in the customer’s agreement? Probably not. Read on…
Why checklists help you identify risks not found from reading the agreement (and why these may be the biggest risk areas)
Let’s go back to your mountaineering expedition. When you packed, you thought you had everything. You were looking at what you had. You were not looking at what you didn’t have.
So it is with agreements. We read an agreement to see if we have any issues with what is there. It’s harder to see what’s not there. A classic example of this is the limitation of liability. If the customer’s agreement has a multi-million dollar limitation of liability for the supplier you might take issue with that if your revenue from this customer is, let’s say, $100,000 annually. But if there was no limitation of liability you might not notice. The absence of the limitation of liability clause altogether can go unnoticed. And there are many other examples of ‘missing items’ that you might not notice are missing. These are often the big risk areas. You see, it’s an agreement issued by the customer, with the customer’s interests in mind. Not necessarily your interests.
This is where a comprehensive checklist helps. A good checklist will help you identify what’s missing. It will also help you review what is included. In both cases, it will provide useful descriptions and alternatives – if there is room for negotiation.
Don’t let the agreements that your customer issues to you put you at risk (without you knowing about it)
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