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[Music] hey there rob how you doing man i'm doing great how are you you know i'm doing well i i appreciate you popping in here um so because i assume most of my listeners have uh quite frankly never heard of you can you just give us a quick little about you kind of thing sure my name is rob scott i'm an attorney in the dallas fort worth metroplex um i work in a law firm called scott and scott llp which is a technology law firm focused on it services and software and i've been doing that since 1999 prior to that i went to law school at hofstra university school of law in new york and prior to that i went to the uh undergraduate school at austin college in sherman i graduated high school in 1989 from richardson high school here in the dfw metroplex cool so uh 99 you've been doing this for a little bit uh would you would you say you're like at law that that's a tricky one right i would say that my expertise in law is focused on computer law there you go and so our firm focuses our practice on areas where um computer technology and legal matters intersect and uh given uh what's happened over the years those intersections have increased with regulatory uh uh privacy and security as well as the growth and adoption of i.t managed services and and cloud solutions um our businesses is um you know you focus on computer law and computer changes computers and technology change rapidly and you're constantly trying to you know keep pace from a legal perspective which always kind of trails the technology gotcha well okay so let's let's talk about some computer stuff because uh well that's what everyone here listens for right so you guys uh like you said you focus on computer law and one of the one of the industries that you guys focus on is managed service providers uh so funny meeting oh so talk to me about is there something that you see often when you look at contracts from msps and you go whoa what do you see any red flags are there and are they common yeah i would say that you know when i first started doing managed services contracts over 15 years ago the question was do you need a contract at all and believe it or not i don't think there's many anymore but there are still some that are operating on a handshake and with no contracts which is a scary proposition uh more uh recently what i see is people who go out and get a a a form off the internet or get a form from a vendor they're working with and without fully understanding the implications of of the contracts that they're adopting within their business they'll run with those agreements and and what i see in general among msps is they're not doing an adequate job with their contracts of mitigating their risk in the event of something going wrong in particular related to third-party service providers such as rmm providers that the cassaya incidents of last summer come to mind as an example of this risk as well as the criminal acts of third parties not involving third party services but could be um um other uh criminal acts malicious attacks hackers uh even criminals within the employment uh you know of the end user customer so what i have generally seen is msp contracts don't do an adequate job of of disclosing who the third party service providers are and therefore aren't adequately waiving the the rights to sue the msp for those failures as well as not going into adequate detail around who's responsible for the criminal acts of third parties and then finally not following the regulatory requirements in terms of having the appropriate data processing terms in place for end user customers for example that are in health care or in financial services or may operate in a state where there's a data protection law or um maybe less frequently are operating um in international um business where eu laws such as gdpr might apply and so i think those are the three areas when i see contracts that i see the most opportunity for improvement and the most opportunity for risk mitigation okay i i like that you say that contracts it sounds like you know one of the biggest things that your proponent for is risk mitigation um okay so let's let's talk about uh risk mitigation for a second how how do msps with today's cyber security landscape how do we mitigate risk how how can we say all right look i know that you've hired me to to basically be like your i.t department but you know i'm i'm not an insurance company and if something goes wrong you know i i'm i'm not the the bank of i.t get to just come and and withdrawal with whatever amount you want yes and then more importantly how do we a lot of msps there like we all rely on third-party tools for practically everything right so how do we how do we go to these companies and say uh well hey look um we don't actually do anything ourselves we we rely on all these third-party products to do it for us uh so because of that we can't be held liable for anything they screw up i think there's i think there's a couple of answers to your questions and there's no single silver bullet on risk mitigation but there are certain pillars that i think are very important uh number one is insurance cyber liability insurance both for the msp and the end user customer our agreements that we provide to our clients specify that the msp will have tech eno including cyber but importantly also require the end user customer to carry a cyber liability insurance for first party claims it could i think i think both of those are critically important beyond that it's incredibly important to have customer contracts that make it clear where the msp's responsibilities start and where they hit and our agreements have got numerous numerous provisions and then that address um circumstances under which the msp will not be responsible last fall i created in response to the cassaya incident something called the schedule of third party service providers and what that is is a table of all of the tools that an msp may use a link to the vendor's end user terms and conditions or applicable terms as well as a link to their privacy policy and in bold letters it says that under no circumstances will the customer sue the msp for any act or failure of a third party service and i'm said i'm sure it states that much more eloquently with legalese right oh sure i mean it it's a very direct but it is direct in language okay uh and it's in legalese but but the point of the matter is is that prior to the cassette incident i had in my contracts just a bla blanket statement that says customer understands that msp uses third parties to deliver some or all of the services and that the msp is not responsible for failures of third-party services i didn't think in response to cassaya that that would be adequate that what we needed was something of a greater level of disclosure uh and a clearer and more unequivocal waiver of the right to sue and that's why we developed this third party service provider schedule so um but but but third-party risks are a big one criminal acts of third party another one lost data another one all of these things need to be taken into consideration in the risk balancing provisions of the agreement which include the indemnity the limitation of liability and the insurance provisions and in our agreements all those work together to put the put the msp in the lowest possible risk that it can by by doing exactly what you said taking the msp out of being in the insurance business and using uh insurance both for the msp and the end user customer for that purpose and put the msp only on the hook for the things that are actually it's a result of its negligent acts or failures to act and then and only then subject to a cap and then and only then subject to many exclusions because in the end for an msp to make any money risk mitigation has to be primary if you think about the managed services and you think about it as a business model you you got other people taking the lion's share of the revenue and putting the vast majority of the um risk on the msp if the msp doesn't do a good job of transferring that risk to an insurance company and mitigating it within its customer contracts then it's not doing a good job and i i'm gonna say finally not because it's the last pillar but because i'm getting to it last good security practices mitigate risk don't dabble in managed services and don't believe that if you're in managed services you're not in security because we're all in security and you have to set it up in a way that you've got the right solutions in place to avoid wherever possible security incidents and so that's the first and primary defense you know a lot of people had cassaya but had other solutions in place that detected the problem before it became a problem and were able to mitigate it such that there was no incident for their customers it's that type of security that is the best risk mitigation you can have but the reality is accidents happen and there's a lot of bad people in the world and that's why you need these other risk mitigation strategies including insurance and great customer contracts that that's a really good point um so so i want to i want to pivot a little bit when i i speak to i'll call them larger msps i'm i'm starting to hear of them uh do things the way that a lot of our vendors are doing where you know you you fill out the the contract online right and it's more like the check the box if you agree to our terms and the terms you click the link and then there's their their contract right so some many msps called the msa the master services agreement and that's because something that became commonplace over the last oh gosh five or so years i want to say is we've got one master agreement and then we've got a separate statement of work and the statement of work is basically here's here's what we're gonna charge you what we're gonna do and then the the master services agreement is um basically just the terms of of our arrangement uh what it's what it's dictating to uh i'm sorry it is dictating what it is like to do business to which would you say that's accurate first of all i would say that's standard and that's consistent with the way our approach is we have uh and now moved because of this move to online contracting we now have a hosted solution for our customer contracts and it is set up the way you describe it it what what we do is we have now tried to collapse the sales process and the contracting process into one step by leveraging the online approach that you've described so what we're doing now is we are having our customers follow their sales process with a quote or a proposal or an order form and then we give them legal language to incorporate by reference the online terms and conditions that you mention including the master services agreement as well as all of the service attachments for any recurring revenue services that the msp may use and as is typical in the industry and in our approach those include a managed i.t which would be your core managed services managed security services which would be sort of advanced cyber or optional security services would be covered there backup and disaster recovery cloud and hosting avoid managed voice over ip we also have um surveillance and access control um any any type of service that's typical in the industry we've got a service attachment that can be bolted on for purposes of running with that msa and in addition to that we built in the third party service providers document the data processing terms which would be the business associate agreement or the any regula regulation required agreements as well as the um service level objectives all contained on hyperlinks to our system all attached as an exhibit to any quote order or proposal that our clients are having their end user customers sign hey so very similar to what you've described we're trying to bring what you describe as enterprise class contracting solutions to the smb i gotta say i feel like more and more companies are finding ways to take a traditional uh like one and done type of transaction and turn it into monthly recurring reven because i assume when when you say you've got to host a solution with agreement and all the bells and whistles now now this is becoming a a monthly recurring revenue situation for you which means now uh the msps are gonna possibly feel like so what's what's the how do i phrase this what why would an msp want to sign up with a service like yours versus just paying whoever you know one of the other contract guys that specialize in msps to just like make them an msa yeah and that's a great question because i was that guy for 15 years until january and that's the way i delivered my services to hundreds of msps and what i learned was that in particular they don't do a great job of managing the contracts themselves because they don't understand them they get in the hands of sales people they change them in ways that don't really protect the company regulations come out and they're not updated for that um uh so so what i've learned is that uh msps contracts need to be looked at touched and updated way more frequently than they used to be you know if if someone came to me and i did their customer contracts in 2015 they may not need to come back to me until 2018 2019 it was not a big deal now we're changing these agreements every day and every quarter people who are on our system get an update to the latest and greatest versions of all of the documents the scheduled third party services for example if you drop a vendor and add a new one that needs to be added we do that every quarter on your data processing terms you know there's state laws coming out all the time there's international laws that could affect you there's federal regulations that are on the horizon and when you sign up with us we cover all that and we update your data processing terms when those laws come out um and so the idea of having a one and done really in my mind doesn't meet the needs of what the managed service provider has and and really what they need is a partner in a lawyer or law firm that can help them manage the legal side of the transactions without interfering with their sales process and so that's what we've tried to develop which is a solution that gives the msp complete control over the commercial terms but essentially locks the terms and conditions and so they're not going to get changed unless we have intervention because we include a review of any end user customer changes in our monthly fee okay um so so so those are the reasons i think why the one and done doesn't make sense but in order to mitigate that concern uh we offer uh options where the client can have a a perpetual license to our forms with no need to continue to pay for maintenance and support that's nice so okay so maintenance and support is an optional thing if you get into it and you you're a year in and you think man these updates every quarter more than i need and i'm really not actively pursuing new customers and so i can run with what i got for a while and i don't want to pay a maintenance and support fee it's optional and you have a perpetual license to the document so i don't i i i don't why i i think it's important for msps to have an ongoing service we've structured it in a way that it's not required they can run with a perpetual license to our then existing forms and not be uh feel bound to maintenance and support and and i just want to clarify i don't want people to like put you in the same bucket if you will as companies like or those where where it's like you know 20 30 a month and they handle all your legal for you right and i i feel like yours is a it's going to be much more customized and tailored to each msp while you while you've got clauses that work in maybe all the states and then you know what clauses work in my particular state i may say to you something along the lines of we're going to use adobe's uh signature tools so make sure that the the contract has whatever clause in there for electronic signatures e-signatures whatever the appropriate term is uh we may we may say hey can you put something in there where uh clients can't you know treat us like crap and curse aside over the phone and throw things at us when we're there can we can we have an out if a client's abusive like you'll you'll help us with that stuff right that's all those things are already there so what i would do in that situation is i would point you to the applicable language to that covers the concern and then if it wasn't there we would do a custom provision to address that concern and all that customization is part of our service it it's we do an initial customization in the first 30 days and then we do ongoing customization every quarter okay so this is a situation where i built this solution so that you can have your own customized version of our master template and i can update your version every quarter because my software is aware of your customizations they don't get overwritten i'm gonna i'm focusing on keeping your customizations while updating the legal terms and conditions every quarter and showing you a report and giving you the opportunity to approve any of those updates before we go live with them that's awesome so what what do services like this usually start at uh we have a variety of different options from you know perpetual pay up front with very limited you know obligations in the future all the way down to um you know pay as little as possible up front and pay a small monthly fee for a longer time commitment okay but i would say that whether you're paying it out over a three year period or you're paying it up front the cost is between 10 and 12 000 total okay uh over that three over that period um and does that so for example i'm so sorry does that include the the maintenance stuff that you guys do as well correct awesome correct correct so so in in the perpetual plus maintenance model uh typical packages are 10 000 up front 2200 a year for maintenance and support um and then in the subscription you know model uh we're running um uh as low as 300 for setup and 300 a month for 36 months um and ultimately that's going to be where i want the pricing to land i want it i want the solution to be available to every msp that's doing any kind of significant business and i think at that price point we should be able to capture 10 percent or more of the market which is my long-term goal is to have this solution uh being used by 10 or more of msps and i believe that in order to do that we have to make it very affordable and so i've been working extremely hard with my team to re-evaluate the way we deliver the services to think more like a sas provider and less like a law firm and um we're on that journey to to bring scalability and bring the cost down both through changes in process as well as adoption of technology that allows us to deliver the services much more efficiently and let's say after the 36 months we're you know let's just assume we're still happy you know you've we've we've paid for it we've we've done the maintenance and you know laws are going to continue changing after three years is there like a continual maintenance after that available yeah so so at that point you'd have um at that point you'd have a perpetual license to all the forms and then your monthly fee would be more around 12 months you know 12 monthly payments similar to what we would charge on maintenance and support to the perpetual the license plus support people so figure um instead of paying 299 a month assuming that the maintenance and support was still 2200 it would be you know under 200 a month okay so i gotta say um for for msps of i'll say most sizes okay because you know there are the little guys who maybe they only have a couple thousand in mrr right so but for for msps of most sizes um you know paying a few hundred bucks as a as a setup fee that that seems completely reasonable because you are customizing this agreement for each msp that comes on board and then and then paying a few hundred bucks a month for for the three years now now we own it after that we're done and we didn't have to shell out 10 12 10 12 000 up front um yeah and then and then ongoing maintenance i mean that that all seems fair man it it really does for you to freedom i i i've engineered it to i've engineered this is one of these things where we've got a service that's chasing a price point in other words in managed services you know my experience with it which is vast i've been in it for 15 years i've been on the board of the msp alliance and the general counsel of that group for 14 years i've been around managed services for a while and i understand that you know most msps or small businesses for whom ten thousand dollars is a lot of money it's not just laying around now i've got some msps that are 50 million plus a year 10 grand 12 grand is nothing to them um but for the bulk of the market i have to deliver a solution that delivers a great deal of value for a very low price correct and that's what this service is designed to do and so let's i want to ask more rapid fire questions if you will okay um so what happens if somebody signs up and for some reason they're not um has we fixed whatever it is that they whatever it is i mean there's no no happy is a is sort of a loose term i mean we haven't had that experience okay um we've got 47 customers that are live on the system since january all msps uh at some point or another they've expressed you know a desire for us to change their agreements or they didn't like particular language that might have been in the forums uh but nobody's been unhappy with our service nobody's been unhappy with um our solution okay um and so what i would say is it would depend on the circumstances but we would make it right i mean we're we're here to take care of our clients and and to make sure that they're taken care of well and one of the things about our law firm is we have a very very high um uh customer satisfaction scores across the board and that's part of our culture to make sure that if a customer is unhappy we confront it we don't run from it we get in front of it and address it so um but but if it turned out that it is something different than what they expected or somehow they you know decided they don't want it we would work it out with them we i you know we're building this service to to help msps not to hurt them so if it turned out to be something that an msp was not happy with we would make it right whatever it took well hey i gotta say um i haven't seen what the platform looks like do you have like a demo or something that you can walk people through before they sign absolutely that's great absolutely absolutely i have a demo and uh i can show i can demonstrate both how our integrations work with the leading platforms such as connectwise cell which many of our clients are using our rapid implementation using can templates that we've developed for connectwise cell that integrate with our solution so i can demonstrate that we've integrated with many other tools including quoter we offer uh out-of-the-box um orders for microsoft word but this is a this is a platform agnostic solution and i can demonstrate it to clients uh how it works as well as demonstrate the actual documents themselves if they have questions like you had earlier what if this happens or what if they cancel for convenience or am i protected in this situation or what are my rights to cancel if they're abusive to my people i show the customers before they sign up all the provisions that address the the areas of their concern that's great thanks so much for popping on here man um i really appreciate it uh for people that want to check you out where can they go what website so the website is um scott and scott llp.com and you could do a google search for scott and scott llp and find it um you can also reach me at 214-999-0080 is my office number and you can email me at rj scott at scottandscottllp.com and set up a demo excellent well there you have it folks thanks so much scott thank you steve