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6 things to know before you sign your next service contract

When you choose to purchase technology services, you frequently sign a contract with the provider of those services. Whether that’s an individual service provider or a big company like Verizon or Comcast. Because these kinds of service contracts are long-term commitments that can end up costing hundreds or thousands of dollars.

It’s important to fully understand everything you’re agreeing to before pressing your John Hancock on the dotted line. Here are six things you need to know before signing your next service contract.

1) What is this Service Contract For?

Although there is no specific definition of what constitutes a service contract, most organizations define it as an agreement between two organizations to provide services of one type or another.  Service Contracts are beneficial for businesses to understand what each party will provide and/or receive. It allows the provider and the receiver to know what to expect as part of normal business but also covers what happens in the event of trouble. 

What Can a Service Contract Cover?

Usually these contracts spell out payment expectations as annually, quarterly, monthly or yearly.  It also defines what services will be provided for that payment.  Ideal contracts are fair for both parties involved in the agreement and resolve potential issues before they happen.  It’s best to read the full agreement before applying your signature so that you understand what you are committing to.  

2) What Type of Services Will I Be Getting?

Before you sign a service contract, make sure you can clearly define what kind of services they will be providing.

For example, if they promise 24/7 tech support, are they able to provide that? If they’re promising help desk services, will their team be able to the needs of your organization? If you are buying a business phone system, how many handsets and extensions will you receive, and when will the equipment arrive? 

When evaluating your options, think about how you want your organizational technology to work.  Do you want consistency with equipment like firewalls, computers, or business phone systems?  Do you want managed IT services or a break-fix solution?

These are all important questions to ask and think about before signing on any dotted lines.

It’s easy to get caught up in a great offer but consider whether or not those services are in line with what you really need.

3) What Is the Length of This Agreement?

Some service contracts are multi-year commitments, but there’s no magic length that fits every business. The contract term defines how long your organization wishes to be locked into an agreement with said business partner. It also determines what happens at the end of that term.  Does your commitment renew for 12 months or switch to a month to month agreement?

While a longer commitment will make it easier for you to budget over time, when you consider how quickly technology advances, it’s best to go with a shorter term if possible.  Otherwise, you could get locked into paying for a service that might not fit with your business’s needs in 18 months.  If you do opt for a longer contract, keep in mind that early termination fees can make it more costly to get out of an agreement sooner than later.

4) How Much Does It Cost To Early Terminate This Agreement?

Asking questions at signup is a great way to ensure you understand how much it will really cost. Are There Early Termination Fees?: These are crucial to watch out for when signing a service contract. Be sure to ask what they will be and how much notice you’ll have to give before canceling. For example, will there be a fee only for closing your account within six months of signing up? Or perhaps only after one year?

In addition to any early termination fees, there may be other costs associated with breaking a service agreement. Be sure to ask what it will cost if you decide to cancel or break your contract earlier than anticipated. Remember, if anything sounds too good to be true, it probably is.   

When a company won’t offer transparent information, think twice before signing on the dotted line. Also keep in mind that sometimes these agreements aren’t even negotiable. They might already be written into your service terms in perpetuity as nonnegotiable terms of use.

5) What Are My Obligations Under This Agreement?

You might have read all of these provisions, but have you understood them? It’s easy to check that all of your bases are covered by asking yourself: What do I have to do in order for my vendor to do its job? Make sure not only that you understand each provision, but also whether or not there are penalties for failing to fulfill an obligation. You don’t want a late fee coming back and biting into your profits.

Finally, make sure that any non-compete agreements or arbitration clauses are appropriate for your business.  If it comes down to either one of those routes, is it likely to be worth it? The last thing you want is to get tied up in legal entanglements with an already-signed agreement just because one small part of it isn’t ideal.

6) What Are The Service Providers Obligations Under This Agreement?

Service contracts should include what to expect when the unexpected happens.  A good service contract spells out exactly what both parties are responsible for, so there aren’t any nasty surprises down the road.

For example, is your IT company solely responsible for network downtime or does that responsibility also fall on employees? If employees don’t adhere to IT or cybersecurity policies can they still be held liable? What happens if an employee damages equipment? All of these questions should be answered in your service contract.

Another important section to review is the service level agreement (SLA).  SLAs spell out what the service provider is guaranteeing they will provide and at the intervals to expect the repsonses. 

For example, if you have trouble with the application you subscribe to, how quickly will they respond to the request.  What happens if they do not reach that expectation? Will you get service credits? Are there any remedies you can expect?

Be sure to read over SLAs.  If they aren’t exactly what you wanted, make sure that to negotiate them before you sign and find out if you can renegotiate later. Having a clear agreement about responsibilities will help reduce any tension when it comes time to deliver on promises and hold both parties accountable for their actions.

You’re Not Alone

Finding the right services for your organization, doesn’t have to overwhelm you.  From contract negotiations and expense audits to equipment purchases, stretching your IT budget can help your organization tremendously. If you need support, we’d love to help. It’s easy to contact us. 

Who Is IT Enabled?

IT Enabled is a managed IT service provider.  We help organizations with 5-500 employees tackle technology issues by providing comprehensive IT including network and tech supportsuch as computer, laptop and server supportcybersecuritydisaster recovery options and business phone systems.  Our business is keeping you focused on your business.

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