#Legal #Issues #Concerns #Risks With #Software as a #Service #SaaS #Agreements are dealt with by SaaS Lawyer Andrew S Bosin LLC on daily basis in counseling clients.
If your company is contemplating doing business with a SaaS provider here are just a few legal issues you should consider before doing so.
With traditional enterprise software, your IT department can ballpark what it is going to cost to purchase the software, install it on your servers and how much each month it will cost to maintain the software. With SaaS software, because there are so many moving pieces, i.e., number of users, amount of data stored and guaranteed performance minimums, it is best to get in writing from the SaaS provider what your monthly costs are going to be to access the services.
While traditional software typically charges a one-time fee, the user of SaaS software will most likely pay a monthly fee to access the software. And, unlike traditional software, the user of SaaS Software does not own a copy of the software or have a license to use it.
You can break down monthly costs pretty easily. You need to nail down how many users will be able to access the service each month and what that cost will be. And, is it a set number of defined users that can access the services such as 20 employees with their own log in or can 20 random employees, no matter who, have access to the services at any given time?
You also need to find out how much of your company’s data will be served and stored on the SaaS provider’s servers. You want to also see if you will be charged an overage fee and how much.
Access To Your Company’s Data
There is some downside to using SaaS Software and this is with regard to control of and access to your company’s data. If the services are no longer available for whatever reason because the customer fails to pay the bill or the SaaS provider goes out of business the customer will no longer have access to the services and will likely lose all of its data.
With regard to a SaaS provider filing bankruptcy, there is a way around the lack of protection and ambiguity in both the Bankruptcy Code and relevant case law. The agreement between the customer and SaaS provider can still be drafted in such a way that the customer still maintains the ability to access the cloud services provided otherwise by the SaaS provider.
This is accomplished by drafting software licenses and/or SaaS agreements as licenses to intellectual property to invoke section 365(n) of the Bankruptcy Code. One needs to be careful to draft the agreements as a present license grant not contingent on some event happening or a future grant. A present license grant would allow the customer to use and access the licensed software and compel the SaaS supplier to provide the software source code, object code, and/or related documentation in the event that the SaaS provider attempts to reject the SaaS agreement under 365(a).
Service Level Agreements
An important part of the SaaS Agreement is holding a SaaS provider to a minimum performance standard in connection with a SaaS agreement. An example is that the service will have an uptime percentage of 99.9%, meaning the service is guaranteed to be up, available and running live 99.9% of the time. This performance standard is known as a Service Level Agreement (SLA). You also need to have the Agreement spell out how the performance standard will be calculated.
Typically, customers are given one day of credit for each hour that the SaaS service is down and not accessible. Although the SaaS provider would likely never provide the customer with this information, I would ask to see documentation showing that the SaaS provider has the same minimum performance standards from the entity that hosts and maintains the services on its behalf.
Here is the scenario. What if the SaaS provider guarantees in your agreement that the services will have an uptime of 99.9%. On the flip side, what if the SaaS provider in its agreement with the company that serves and hosts its services is only paying for up time of 99.2%. This means that the SaaS provider is taking a risk that the performance standard or uptime for its services will never fall below 99.9%.
These are all legal issues and questions that can be answered by an experienced SaaS Software Lawyer.
Andrew S. Bosin, LLC, Esq. | www.njbusiness-attorney.com