When signing up for managed IT services, you’ll agree to a contract term with your managed services provider (MSP).
The length of that contract will vary based on who you choose as your MSP. Many MSPs (including us) have contract lengths for 1, 3, and 5 years.
A question we at The KR Group frequently receive about those terms is what are the pros and cons of each one.
The pros and cons vary depending on which contract term you’re considering.
- One-year contracts have the least commitment but also give you the least amount of time to connect.
- Three-year contracts offer moderate options with some commitment but may not be the right length for everyone.
- Five-year contracts require the most commitment, but in return, offer a premium rate.
All of these MSP contract lengths have their pros and cons, and every business has different needs. There isn’t one contract term that is better than the others. Instead, it’s what makes the most sense for your business.
One-year MSP contract
Outside of the first 90-days of a contract with an MSP, you’ll be obligated to a minimum of a 1-year contract.
This contract term serves as a binding agreement to give you and your MSP a chance to work together.
Pros of a 1-year contract
The 1-year contract offers the least amount of commitment from you, the customer. This option often makes sense for customers who are unsure if managed services are the best option for them or want a trial period with their MSP.
Another situation when 1-year contracts make sense is if your company is expecting to outgrow your MSP or you intend to rely on an MSP temporarily (for a year) while planning and recruiting for an in-house IT department.
Cons of a 1-year contract
While you shouldn’t feel “trapped” in a 1-year contract, you won’t have the time to build a rapport and relationship with your MSP.
If problems regarding the quality of service do arise, your MSP is up against a relatively short deadline to solve them.
When it comes to cost, a 1-year contract doesn’t offer any financial incentives since it is the minimum requirement.
Three-year MSP contract
In regards to a service contract, 1 year isn’t that long.
In today’s age of technology, your business will need IT monitoring and management for the length of its existence. For small- and medium-sized businesses, trusting an MSP to handle these responsibilities has many benefits.
If a 1-year contract feels too short and a 5-year contract feels too long, a 3-year contract might offer the “just right” option.
Pros of a 3-year contract
Three years gives you three times as much time as a 1-year contract to flesh out the nuances of your managed IT services.
Compared to a 5-year contract, this term has less commitment, though. Three-year contracts are a good option for businesses knowing they want to stick with managed services for more than a year but not willing to commit to 5 years.
For agreeing to longer contract terms, many MSPs offer a premium rate. Here at The KR Group, our MSP customers committed to 3-year contracts receive 15% off the price of managed IT services.
Cons of a 3-year contract
Depending on the customer’s preference, 3 years might seem like too much of a commitment, though. On the flip-side, other customers might not think it is enough time.
The 3-year contract is the middle-of-the-road option, which means it might be a great match for some MSP customers’ needs and not fit others.
Five-year MSP contract
For many MSPs, including The KR Group, the longest service term they offer is a five-year contract.
This provides the most time to get to know your MSP while taking into account that both you and your MSP are changing over time.
Five years is a long time when it comes to technology. We can almost guarantee technology will change again in the next 5 years, and you’ll want to reevaluate if managed services with your current MSP is still the best fit for your needs.
Pros of a 5-year contract
In general, there are many benefits to longer-term contracts, such as:
- Dedicated account support – Your MSP engineer(s) gets to know the intricacies of your network and identify problems quickly.
- Stronger partnerships – With a 5-year contract, you have several years to establish a relationship and understand how your MSP handles requests.
- Increased security – With IT, if your MSP has had time to recognize users and activity across your network and may be able
- Best return on investment — If you end up buying – as opposed to renting — hardware to accompany your managed IT services contract, you can use it for longer.
A 5-year contract allows the most time to work toward and enjoy all of these benefits.
As with 3-year contracts, many MSPs offer competitive pricing for customers to agree to a 5-year contract. The KR Group offers a 25% reduced price for MSP customers in 5-year contracts.
Cons of a 5-year contract
If things do go awry with your MSP, though, you’ll be committed to 5 years with them.
If you decide the problems are worth leaving your contract prematurely, you’ll have to pay out more than if you had the same experience in a shorter contract.
Picking the best term-length for your business
How do you know which option is best?
At the end of the day, the service length you decide is right for you depends on what you’re comfortable with.
If you’re willing to make a longer commitment for the most savings, a 5-year contract provides the best value.
If you’re unsure about agreeing to a managed IT services contract and/or an MSP, a 1-year contract can serve as an extended trial period to allow you to test and see if it’ll meet your needs.
Other questions you should ask yourself when deciding which contract term to agree to:
- Why do you need an MSP? Is it for short-term or long-term needs?
- Are you a growing business? If so, how soon do you expect to outgrow your MSP?
- How sure are you that managed services and this MSP are the best options for your IT needs? Are you wanting to test out this option with less commitment?
How you answer these questions will likely guide you on determining if a 1-, 3-, or 5-year contract is the best fit for you.
If you’re interested in what working with us at The KR Group, you can check out our free guide to signing a managed IT services contract.