10 Questions to Ask Yourself Before Going Into a Managed Service Agreement

Choosing a managed service provider is never an easy task and it’s a crucial decision. A significant amount of time and effort is required to switch providers or in-source a service and it may take over 6 months to truly realize the benefits of the service.

This is why I decided to share my thoughts on choosing a managed service provider in this three-part blog series. You can read the first part here:

As I have already explained in the above article what managed service is, this time I will cover more specific tips and provide some questions worth asking yourself (or the provider) before signing the contract.

 

1. Are you a small or big fish in your provider’s ‘pond’?

The question I am often asked during RFP (Request for Proposal) processes is ‘if we were to sign this agreement, how big (revenue-wise) of a customer would we be for you?’. As a customer, you want to know if you will be their top 1, top 5/top 10, somewhere in the ‘middle’ or ‘low end’. Asking for data supporting the answer, like financial statements and top customer breakdowns often make sense to validate the responses.

Depending on the service you outsource, how standardized it is, how deeply specialized, the answer you want to hear will vary. As a rule of thumb for standardized services (like ‘backup as a service’), that will not be a large part of your entire IT operations budget, look for providers who have done it for a large number of customers, and hence you will not make their ‘Top 10’.

Managed services provider

For customized managed service that is critical to your IT operations, may include your custom business applications and is a large part of your IT budget, look to be anywhere in between Top 3-Top 10 of your provider customers. You want to have a strategic partner that will help you grow your business and treat you with priority and focus.

Being a Top 1 customer of any provider for a sustained period of time is risky. It’s OK to start as one, but if your provider does not grow and provide services to other customers, they will become reliant on revenue from your company, potentially may opt for vendor lock-in and you will not be able to gain benefit from their experience with other customers.

 

2. Specialized or general (wide) scope?

As you are putting forward the RFP/specification, you may be tempted to bundle all your needs into one package. This is often what companies do to avoid the fate of ‘vendor battles’. Some issues in IT environments are complex and may require vendor cooperation. Not all providers are open for this kind of collaboration, so be sure to check this in your reference calls and questions.

The case for specialization is valid when the service has a fairly narrow scope, like for example your core business application/platform that requires specialist knowledge and focus. Usually, vendors will specialize in some technology stack, so throwing everything into a single RFP will likely yield you only big vendors, for which you will never be in the Top 10 bracket described above.

 

3. Shared or dedicated team?

It is important to understand whether the service you will be receiving will be provided by dedicated, hybrid, or shared team. The shared team is best for simple or small volume services. For most large organizations a hybrid team is best, where there is a core team that is dedicated only to you, supplemented by specific area SMEs who ensure the additional skills and are present to support the core team.

When people have to work with more than 3-4 customers and the volume of work is significant for each, it is difficult to build relations, understand the customer’s processes and deep dive into the technical details of their applications.

 

4. Process maturity but also flexibility

Process excellence is important in service contracts, however, be careful of signs of rigidity. For all services that are larger than just a few monthly hours, you will require some amount of flexibility from your provider. Aligning 100% to a rigid process is rarely possible, so you would be looking for a mix of relevant experience and know-how supplemented by the willingness to change and adapt.

 

5. Intellectual Property

It is important to see what the provider is able to bring to the table aside from pure manpower and process perspective. If the provider has delivered such services before, he will be able to present the IP developed during previous engagements that may be reusable with little or no additional fee in your service.

 

6. SLA: be realistic, what can you (afford to) measure?

Managed Services SLA

When setting SLAs for the contract, don’t go overboard. Be sure you (or the vendor) can measure what you state. As the service matures, the KPIs may be added. It’s good to inquire the provider to provide historical, anonymized data from other services they carried out.

 

7. Transparency

Managed service contracts are long-term. You want your partner to be as transparent as possible. Will they be willing to share all the data they gather on providing the service to you? How honest are they about who is going to do the service and from which location?

You want a partner that will communicate the service performance to you in a transparent fashion, even to the point where the service price is adjusted when improvements materialize, and the benefit is enjoyed by not only the vendor but also the customer.

Ask tough questions and see how they respond. Being vulnerable with your weaknesses is not a standard corporate practice but goes a long way to a trustful business relationship.

 

8. Exit options

Each contract will come to an end one day. Take a good look at what are your exit options. Are there any exit fees and how long is a notice period? Are there any options for in-sourcing? Is the knowledge base transferred to you, are ITSM processes built on your platform?

At Predica we do not like to lock the customer into our services. A customer being with us only because he has to will not be happy. For larger services, we also prefer to work on customer ITSM platform, as this allows the customer to retain the history, knowledge base, CMDB when the vendor is changed.

 

9. Understanding business context

Is the provider putting in the effort to understand your business, your challenges? Is he actively listening, asking smart questions and probing for specific data? Are they pushing their own solutions, or open to change and adjust to fit your needs? Additionally, a service transition plan will tell you a lot about how the provider is able to anticipate challenges in the first months of taking on the service.

 

10. Cultural fit

The importance of cultural fit in managed services

Ask about company culture, see if it is exhibited in the long RFP process. Check if it is in line with your core values. Two organizations with vastly different values, and hence behaviors and priorities will not be able to work together efficiently and with trust. Meet your future service manager/owner – see for yourself if this is the person you could work with on a regular basis.

Will these questions be helpful in your journey to find the best managed services provider? I hope they will. Will they allow you to avoid missteps and bad decisions? Unfortunately, I think there is no guarantee, as there is always something we might miss. But I still believe that the correct preparation and research is the key to success, so keep these rules in mind while looking for the Chosen One (or, in other words, your dream managed services provider)!

Key takeaways
  1. It’s OK to start as a Top 1 customer of your provider, but being it for a sustained period of time is risky.
  2. Read between the lines: ask your future provider tough questions and see how they respond.
  3. Cultural fit is as important as technical aspects when it comes to long-term cooperation with your managed services provider.

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See also

10 Questions to Ask Yourself Before Going Into a Managed Service Agreement

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What is DevOps and why it is crucial for the organization’s success

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Why is your Competitor Using Managed Services Outsourcing Model?

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