SaaS Agreements Attorney, Lawyer serving SaaS companies nationwide Andrew S. Bosin, Esq. specializes in drafting and negotiating SaaS agreements and contracts. Andrew can be reached for a free consultation at 201-446-9643 | firstname.lastname@example.org.
Software as a Service (SaaS) is cloud, web-based, on-demand software that allows third-party providers to host a company’s applications and make them available to customers via the Internet. SaaS companies will typically generate revenue through subscription and licensing fees. Whether a given situation calls for a SaaS-style agreement or software licensing depends on your operational details. Our online business lawyers can determine which model works the best for your company.
Software as a Service (“SaaS”) Agreements is a term that is used to apply to a wide variety of SaaS service provider agreements. Infrastructure as a Service (IaaS); Platform as a Service (PaaS), (CaaS)
In essence, they all refer to a cloud, web-based model in which a service is hosted by a SaaS vendor and delivered remotely via the internet to the customer via cloud services model. This differs greatly from traditional local network software where the vendor installs its software locally on the client’s internal network. There is no access by the client via the internet to the vendor’s software; rather, the client hosts the software on its own servers/network.
Another way that the SaaS model differs from traditional local network based software is the fees generated by services offered by the SaaS vendor. Typically, SaaS vendors will generate fees via a Service Level Agreements (SLA), that typically categorizes service support issues based upon the severity of the event; and the vendor offers different responses time and sometime a credit if the vendor’s SaaS application fails to achieve a minimum uptime availability typically 99.5%. SaaS vendors can also earn fees from services such as maintenance, software and creating derivative versions of their Software for clients.
The SaaS cloud-based model can also differentiate itself from traditional software because implementation can take minutes. Once the client has paid the subscription fee the SaaS vendor will typically give the client access to their SaaS product via the internet. The client also saves time and money on maintaining the SaaS software because it does not need employees to maintain the software and unlike traditional software, typically, SaaS software can scale quickly to meet a client’s growing needs.
SaaS Agreements should also contain certain necessary and important terms and language such as “Acceptance“, “Warranties & SLAs“, “Indemnification“, “Limitation of Liability”, Data Security, amongst other terms.
Acceptance – means that you as the client accept your obligations in the SaaS agreement and usually it is when your payment obligation starts. It could also mean when the time period begins for the vendor to provide SLA’s and Warranties.
Warranty and SLAs – These terms mean different things then a typical warranty offered on consumer goods. A SaaS vendor might only offer a warranty that its SaaS product will function properly according to the documentation that it has provided the customer and that it is not offering any warranty to fit the particular needs of any one client.
Indemnification – could mean different things in a SaaS subscription agreement if you’re the vendor or the client. The vendor typically offers one indemnification which is that if a third party sues the client claiming that the vendor’s product violates the IP, trademark or copyright of the third party that the vendor will indemnify, hold harmless and pay all of the client’s damages. If you’re the customer the vendor might want your company to indemnify it for your company’s use of its SaaS product and also for the integrity, authenticity and legality of all your company’s data that you’re going to upload to the vendor’s cloud based product.
What Language, Key Terms Should Be Included In a SaaS Agreement?
Well written, effective SaaS contracts limit liability and allow for maximum profitability. That can be achieved by having language in the agreement dealing with:
- Permitted use;
- IP ownership and infringement;
- Data ownership and responsibility;
- Data storage capabilities;
- Software modifications;
- Data breach notification procedures;
- Service Level Agreement (SLA);
- Warranty Disclaimers;
- Liability disclaimers;
- Insurance obligations; and
- Virus protection;