What Is a Master Service Agreement (MSA)?

And why does your business need one? Learn: the meaning of a Master Service Agreement, why businesses use it, and how businesses can leverage technology to get the most value out of it.

In business transactions, every step and turn requires precision and trust. Master Service Agreements (MSAs) have emerged as the cornerstone of business agreements between companies. These agreements are the backbone for countless corporate relationships, enabling a smoother, more efficient partnership. 

What is a Master Service Agreement (MSA)? 

A Master Service Agreement is a comprehensive contract that spells out, in advance, the terms between a service provider and the client. Its primary purpose is to speed up and simplify future agreements between parties. These terms cover payment schedules, confidentiality, delivery timelines, dispute resolution mechanisms, and more. By having these terms agreed upon at the beginning of a business relationship, the parties can focus on the specific details of each engagement, such as the scope of work and delivery timelines, such as in a separate statement of work (SOW).

An MSA typically contains multiple sections, each designed to address different aspects of the business relationship. They generally aim to serve four broad purposes:

A Framework for Clarity and Efficiency

At its core, an MSA is a contract that sets the general terms between parties for all transactions. By agreeing on these terms upfront, companies can avoid the redundancy of negotiating the same points for every project or service, focusing instead on the specific details pertinent to the task at hand.

Risk Management and Legal Protections

Another critical aspect of MSAs is their role in risk management. By setting forth liabilities, indemnities, and warranties, MSAs provide a clear roadmap for handling potential issues, from service delivery delays to contract breaches. Of growing importance are clauses that address companies' intellectual property and confidential information. In an era where data is as precious as gold, having robust confidentiality clauses can be the difference between maintaining a competitive edge and losing it to competitors.

This preemptive approach to risk management is invaluable, offering businesses a safety net in an unpredictable market.

Adapting to Change

Well-crafted MSAs provide the ability to adapt business relationships to changing conditions. Quickly adjusting to new market conditions, regulatory changes, or technological advancements is crucial in a fast-paced business environment. MSAs often include provisions for amendments, ensuring that the agreement remains relevant and effective over time.

A Testament to Trust

One of the most understated benefits of an MSA is its role in building and cementing trust between parties. By mutually agreeing to a set of terms that govern their relationship, companies demonstrate a commitment to fairness, transparency, and cooperation. This foundation of trust is essential for fostering successful, long-term partnerships.

Common Clauses in MSAs 

With these purposes established, let’s breakdown of the specific clauses you would expect to find in an MSA:

Introduction and Scope

Defines the parties involved and the purpose of the MSA. Outlines the general scope of services or products to be provided.

Services Provided

Describes the specific services or products that will be provided under the agreement.

Work Standards

This clause describes the criteria for the quality of the work performed. The more thorough and precise this clause is, the less likely there will be a misunderstanding between the client and vendor about what constitutes acceptable quality.

Payment Terms and Conditions

Outlines how and when payments will be made. Includes invoice details, payment schedules, taxes and fees, and any interest on late payments.

Confidentiality and Intellectual Property 

Details how confidential information is handled and protected. It is also known as the non-disclosure clause. This section of an MSA protects intellectual property and other proprietary information from being disclosed. Specifies the ownership of intellectual property (IP) rights related to the services provided or products developed during the term.

Warranties

Describes warranties provided by the service provider.

Limitations of Liabilities 

Outlines liability limitations and indemnification clauses, specifying the extent to which each party is responsible for damages or losses.

Dispute Resolution

Specifies the process for resolving disputes between the parties, including mediation, arbitration, or litigation procedures. Identifies the governing law and jurisdiction for the agreement.

Compliance with Laws and Regulations 

This clause requires both parties to comply with all relevant laws, regulations, and standards applicable to the services provided and business conduct.

Amendments and Modifications 

Outlines the process for making amendments to the agreement. This ensures that any changes are mutually agreed upon and documented.

Notices

Specifies how notices under the agreement should be given, including the addresses to which notices should be sent and the acceptable delivery methods.

Indemnification 

If the project causes the client or vendor to have a loss, the MSA’s indemnification clause outlines what compensation, if any, is owed.

Term and Termination

Specify the duration of the agreement. Includes conditions under which either party can terminate the MSA.

Each MSA is unique and tailored to the specific relationship and needs of the parties involved. While the above clauses are commonly found in MSAs, additional sections might need to be included to address particular aspects of a business relationship.

When Should a Business Consider Using an MSA? 

A business should consider using a Master Service Agreement (MSA) when it anticipates engaging in multiple transactions or a long-term relationship with another party. Here are some common scenarios where an MSA is particularly beneficial:

Ongoing Relationships

If your business plans to engage in a long-term relationship with a vendor, client, or service provider, an MSA is ideal. It sets the foundation for a continuous partnership, making future transactions smoother.

Frequent Transactions

An MSA can streamline this process if your business regularly conducts transactions with the same entity. Instead of negotiating the terms and conditions for each project or order, an MSA allows you to negotiate them once and apply them to all future transactions.

Complex Service Offerings

For businesses providing complex services that require detailed explanations of service scopes, deliverables, timelines, and quality standards, an MSA can provide a clear, comprehensive framework that governs all these aspects.

Risk Management

In situations with significant risks associated with the services or goods being exchanged, an MSA can help clearly outline risk allocation, liability, indemnification, and insurance requirements.

Collaborations Involving Intellectual Property

An MSA can protect your rights if your business involves sharing or creating intellectual property. It can define who owns what IP, how it can be used, and how it is protected.

High-Value Contracts

For high-value contracts or where substantial amounts of money are at stake, an MSA helps in setting clear terms regarding payment, billing cycles, late payment penalties, and other financial arrangements.

Regulatory Compliance Needs

Businesses in heavily regulated industries (like healthcare, finance, or telecommunications) may use MSAs to ensure that all transactions comply with industry-specific regulations and legal requirements.

Confidentiality Requirements

When confidentiality is a priority and sensitive information is exchanged, an MSA can include non-disclosure agreements to protect both parties.

The Challenges of Managing MSAs Manually 

Too often, contracts are edited on local machines and then emailed back to counterparties. This process tends to be manual, error-prone, and often challenging to maintain clause consistency at scale. Since MSAs are such long documents, inconsistent language can be especially difficult to track for proper risk management. 

One significant challenge is the difficulty in tracking changes: amendments and updates are common in the lifecycle of an MSA. Manually tracking these changes, ensuring all parties have the latest version, and maintaining an accurate history of amendments can be cumbersome and error-prone without a CLM tool. Moreover, contract managers may spend hours, or even days, poring over lengthy, complex documents to surface critical dates, deliverables, costs, and other crucial contract data. Thirdly, the contract approval process presents yet another hurdle in managing MSAs manually: routing agreements through email chains, chasing signatures, and managing approvals can be a bureaucratic maze, slowing down your business and causing unnecessary delays. 

Without a centralized platform, manual MSA management lacks the real-time collaboration features found in digital tools, making it difficult for stakeholders to contribute and review changes simultaneously. It isn't easy to gain a holistic view of all MSAs and their statuses without a centralized, digital system. This lack of visibility can impede a business’ strategic decision-making and risk management efforts. Finally, collaborating on contracts with stakeholders over traditional email-based methods leaves businesses vulnerable to loss of crucial details, important deadlines, and even security breaches. 

Fortunately, there is a better way. Businesses are increasingly adopting a contract lifecycle management (CLM) platform to help them manage contracts.

How a Contract Lifecycle Management Platform Can Help Manage MSAs

Imagine waving goodbye to missed deliverables, unclear terms, and the endless email chains of managing MSAs. A contract lifecycle management platform is a business’ secret weapon, transforming those clunky agreements into strategic assets that generate value. A platform like Icertis Contract Intelligence acts as a central hub, storing all your MSAs securely and in one place. No more digging through emails or worrying about outdated versions. Need a specific clause? Search it up in seconds! 

With Icertis Contract Intelligence, approval workflows become a breeze, with electronic signatures speeding up the process and ensuring everyone's on the same page. Automated reminders keep your MSAs compliant, highlighting upcoming renewals or potential risks. Post-signature, the platform helps businesses gain valuable insights into their contracts, helping to negotiate better terms and optimize business relationships. 

​“ICI has been crucial in providing insights into our contract workflows and has created tremendous measurable efficiency. The legal operations team used to rely on manual processes; now, we’re able to review, negotiate and approve contracts more quickly, and get to revenue faster.”
- Eric Winston, General Counsel and Chief Ethics and Compliance Officer, Mphasis

 

Icertis Customer Digitizes their MSAs

Mphasis, a large IT solutions provider, struggled with managing over 7,000 legacy contracts, including MSAs, NDAs and SOWs manually. By implementing the Icertis Contract Intelligence Platform, they digitized their contract workflow and achieved a 35% reduction in contract turnaround time. This contract lifecycle automation eliminated roadblocks and sped up revenue collection. Mphasis is looking to further leverage the platform with AI and integrate it with their CRM for deeper customer insights.

Contract Management AI

With the advent of AI, contract management gets even better. Have a question about your MSA that will take some digging? Ask your AI copilot! The best contract management platforms come ready-equipped with them. With the Icertis Interactive Insights Copilot, you receive an answer instantly and are taken to that exact place in the contract. With the Icertis Risk Assessment Copilot, contract clauses are automatically compared to a company’s approved language, giving reviewers an intuitive look at what clauses need their attention and which ones are good to go.

By leveraging these amazing capabilities of a CLM platform, businesses can manage their MSAs more efficiently, reducing errors, minimizing risks, and fostering a more collaborative and streamlined negotiation process. 

Start your journey to better contract outcomes with Icertis Contract Intelligence and Copilots. Request a demo today to learn more.

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