Key Points in a SaaS Agreement

Software as a Service (‘SaaS’) functions on a delivery model wherein a third-party provider hosts an application that is offered as a service.  This is to differentiate between ON PREMISE solutions which are fast disappearing.

SaaS offers its users a ton of benefits, but it is best optimized when the provision of the service is governed by an agreement between the provider and the customer.

SaaS agreements CAN be clickthrough agreements on a website but here, we are talking about a direct SaaS agreement that you contract with a vendor.

A SaaS agreement is essentially a legal document that defines the terms of the provision and delivery of software services to customers. Well-drafted SaaS agreements eliminate the incidence of disputes between both parties in the course of the contract. To ensure that a SaaS agreement captures the expectations of the parties involved, there are key points that it must cover. Read to find out what they are.

Key Points To Cover In a SaaS Agreement

The following points must be captured in any properly drafted SaaS agreement for the agreement to serve its purpose

  • Technical Specifications: The technical specifications of the service being provided must be clearly spelt out. These specifications define the functionalities of and the expectations for the SaaS service. It also provides a means for measuring the performance of the SaaS service. Defining the technical specifications prevents disputes between both parties and helps if the need for customization arises. 
  • Intellectual Property Rights: With SaaS, the key element of intellectual property rights is licensing because it specifies the way content is to be used in the course of the subscription period. Provisions must be made for revocation or modification of the licence if the subscription expires or is cancelled. Other issues like the ownership, storage, transmission and access of data should always be clearly defined, and depending on the sensitivity of customer data, it might also be appropriate to address storage. Responsibility for the protection of data created using the SaaS service should be clearly defined here.

It is also important to note that while the SaaS vendor will own their own IP, you must be able to retain your IP and easily move it off of their database.  Also, in more complex business requirements, this SaaS will connect with other internal softwares, those ‘connectors’ should belong to you, not the vendor.

  • Payment Clause: This is the aspect of the SaaS agreement that outlines the preferred payment methods for the SaaS subscription. Are you paying per user/seat, monthly, yearly and CAREFUL OF THE AUTORENEWAL contracts or contracts you can’t cancel.

You should be able to cancel, move your data, etc.  SaaS vendors should rely on the value prop of their software to keep customers.

  • Limitation of Liability and Disclaimers: Like with all business transactions, issues of liabilities and commercial risks are likely to occur in the course of the SaaS subscription. For example, issues like operating system incompatibility, breaching of terms and conditions and third-party hosting, intellectual property infringement, among others, can generate confusion and dispute when not handled properly. Liabilities and disclaimers should be specifically addressed so that in the worst-case scenario, liability is shared accordingly.  Assess YOUR risk, and ensure that the vendor doesn’t completely limit their liability.
  • User Obligations: This deals with the obligations of the end-user about the expectations around the use of the software. Safe storage of personal information and update of the product and the notification in the event of security breaches where and when necessary are some of the user obligations that must be spelt out.

Takeaway

SaaS is a critical element of your business, make sure that the contract you sign with your SaaS vendor fits your business needs. 

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