IT companies are not about bureaucracy and complexity but flexible and productive work. In order not to sign and analyze each time-similar contract on 15 pages with a difference of one clause, a Master Service Agreement (MSA) is concluded. It is a framework agreement for the provision of services, which is necessary to settle most of the details and expectations of both parties.
The goal of the MSA is to agree on all the main points of interaction before the start of the project:
determine the main principles of cooperation between the parties
establish the procedure for the provision of services and the process for their payment
specify the principles of transfer of intellectual property rights and protection of confidential information
choose the law to be applied, establish the responsibility and guarantees of the parties, the procedure for compensation of damages
MSA allows you to reduce document flow.
After the signing of the MSA, a signing party can regulate other agreements in concise appendices to it — in the Statement of Work, or SOW, where the parties define an approximate plan of cooperation, detail the specifics of individual stages of cooperation (milestones), indicate the cost of the services provided and the procedure for transferring the software.
MSA not only fights bureaucracy but also has other advantages:
Reduction of the time of conclusion of contracts. Having drawn up a high-quality MSA once, you can sign it with each client and detail the cooperation specifics in the agreement appendices. To reduce time, you can place the MSA on the website in the format of a public offer and separately sign the addendums with the client.
Absence of pitfalls. It is easier to draw up and negotiate one large contract than ten. Therefore, with an MSA, each party has less risk and more time to focus on the essential parts of the discussion.
Master Service Agreement checklist
Placed immediately after the introductory section with the names of the parties involved in the contract, official contact information, and legal addresses. This part of the MSA discloses:
goals and objectives of future projects
conditions according to a single technical task (Statement of Work) for all projects or according to a particularly technical job for each project
the procedure for adjusting the order or changing the technical task
reporting regulations for work performed
description of the work model, standardized working hours concerning the time zone in which the performer works
rules and restrictions for contacting other contractors during the current project
guarantees of independence for the software company and the client
Payment and procedure for acceptance of work performed
This section of the MSA establishes the following:
the process of accepting the provided services
reasons for refusing to accept work or requests for changes and corrections
commissions and taxes
regulations on accounting for working hours and reasons for compensation of unplanned expenses
payment transfer methods
There are three main payment methods for software development:
A dedicated team (dedicated team model) is the best option for complex products when the client manages the core team of developers. Payment is made monthly, depending on the developer's hourly contribution to the project.
A fixed price (fixed price method) is suitable for projects with detailed plans and estimated terms of implementation. Payment can be made as a one-time payment after the customer accepts the product, or it can be linked to milestones, completed tasks, or intermediate phases.
Time and Material/T&M (time and materials) is a method for flexible products with an indeterminate volume. The employer covers the cost of the materials and pays for the actual hours the developers spend on the task.
Termination Terms and Conditions
Individual projects have their deadlines and time frames. Therefore, the period of cooperation between the IT company and the client is defined in the Master Service Agreement. This section also describes the reasons for the early termination of the contract. If necessary, set the automatic extension procedure.
Intellectual property rights
This part of the MSA states:
what results of work on the project within individual SOWs fall under the concept of intellectual property
who retains the right of ownership, copyright, and other rights related to the results of the work
what data and materials must be transferred to the customer
which software, inventions, technologies, and data that are developed before or during the collaboration do not pass from the developer to the customer
To protect the data that became known during cooperation, the contract specifies which information is confidential and is not subject to disclosure to third parties.
Liability and Indemnification
This section establishes penalties for breach of contract and limitations of liability. It is necessary to determine the following:
who will be responsible for failures, contingencies, infringement of intellectual property rights, or other damages, thereby providing guarantees and compensation for both parties
how the responsible party compensates for the damage
exceptions from compensations
Generally, the parties are not liable for consequential damages. However, the parties may specify exceptions in the MSA.
Communication and messages
For ongoing communication during development, the MSA specifies the parties' representatives, the methods and tools selected for communication or locations established for actual meetings, and the procedure for receiving official communications.
If you wish, you can add other conditions:
the procedure for making minor changes to the contract and its annexes
the process and periods for checking project results
the organization of further support and testing of the product
Master Service Agreement is the right solution for today's companies, which will save time and resources in the future. The result depends on the accuracy and clarity of the MSA wording, the process, and customer feedback.
Icon.Partners will help with this issue.