Before You Sign: The Executive's Interrogation Guide to Managed Services Agreements

Managed services agreements occupy a peculiar corner of enterprise contracting: they promise to reduce your operational burden while simultaneously asking you to trust the vendor's own reporting on whether that burden was actually reduced. For chief executives evaluating a multi-year engagement, the difference between a strong partnership and an expensive dependency often comes down to what gets asked before the pen touches paper.

Here are seven questions we advise every CEO to put directly to a prospective provider — and, at the end, the two answers that should end the conversation.

The Seven Questions

1. How is your compensation structured relative to my outcomes?

If the vendor earns more when ticket volume rises, you have hired a company whose revenue depends on your problems persisting. Ask for the incentive map in writing: which metrics increase their margin, and which decrease it.

2. Who exactly will be staffed on my account, and what is the turnover rate on that team?

Sales presentations are staffed with senior talent. Delivery teams frequently are not. Request the résumés of the named delivery leads, their committed allocation percentages, and the account's attrition history over the past two years.

3. What does each SLA metric actually measure — and what is excluded?

A 99.9 percent uptime commitment means little if scheduled maintenance, third-party outages, and 'force majeure' carve out the hours when systems actually fail. Ask to see the exclusion list before you see the headline number.

4. What are my exit costs, year by year, if I terminate for convenience?

Lock-in rarely announces itself in the pricing table. It hides in knowledge-transfer fees, license assignments, data egress charges, and transition assistance billed at premium rates. Model the full cost of leaving at each contract year.

5. How do you handle scope changes, and what is your average change-order markup?

The contract price is the floor, not the ceiling. A vendor who cannot produce historical change-order data — volumes, markups, dispute rates — is either unprepared or unwilling to be transparent.

6. What security and compliance liabilities do you accept contractually, and what do you push back to me?

In the US regulatory environment, a breach in your vendor's environment is still your breach in the eyes of customers and, increasingly, regulators. Understand precisely where their indemnification ends.

7. Can I speak with two clients who terminated their contract with you?

Any provider can produce references from satisfied customers. The character of a services firm reveals itself in how relationships end. A vendor who refuses this request is telling you something.

The Two Answers That Should Walk You Away

We will offer a candid opinion here, informed by two decades of reviewing these agreements on behalf of enterprise clients.

First: 'That's handled by our standard process — we can't modify it.'

When a vendor declines to negotiate a material term — an SLA definition, an exit clause, a liability cap — and offers no substantive explanation beyond the existence of a template, they are signaling how the entire relationship will operate. Rigid before the signature is inflexible after it. Walk away.

Second: 'We've never had that problem before.'

This answer, delivered in response to a specific risk question — data breach scenarios, key-person departure, sub-processor failure — is not reassurance. It is a confession that the vendor has no playbook. Every mature services organization can describe its failure modes in detail. One that cannot has simply never examined them.

Due Diligence as Leverage

Executives sometimes worry that pointed questions will sour a negotiation. In our experience, the opposite holds. Sophisticated providers welcome clients who probe; they know that misaligned expectations, not poor service, destroy most managed services relationships. The questions above cost an afternoon. The wrong contract costs years.