Managed service providers (MSP) should carefully review their subscriber contracts to confirm the contracts do not weaken the MSP’s marketability if the MSP owner wants to sell the business.  A managed services agreement that allows the subscriber to cancel the agreement at any time and with no penalty will devalue the MSP because the MSP will not have a guaranteed revenue stream.  With no guaranteed revenue, potential buyers will be less interested in purchasing the MSP.

Managed services agreements that assign all intellectual property rights related to the service contract to the subscriber weaken the strength of the contract.  Rights to any software, processes, or marketing materials developed by the MSP under the agreement would belong to the subscriber.  The MSP will have forfeited a potentially substantial revenue stream from licensing agreements with licensors.

MSPs often want to retain the right to increase rates for new subscribers with whom the MSP is unfamiliar.  Flexible rates allow MSPs to ensure new subscribers understand the importance of keeping their account current.  A managed services agreement that does not allow the MSP to raise rates under certain conditions exposes the MSP to potential losses.

If you are selling an MSP, buying an MSP, or if you are an MSP enrolling new subscribers, you should consult counsel experienced in advising managed service providers.