The rapid expansion of cloud computing has changed the way enterprises use technology. Rather than purchasing software and implementing it on different computers or servers, many organizations prefer to subscribe to online software services. This method of doing business, called Software-as-a-Service (SaaS), has led to the necessity of creating unambiguous agreements between service providers and customers of such services.
The SaaS Agreement is a binding contract establishing the relationship between the SaaS provider and its clients or customers. It includes to what extent the service provider provides access to the cloud-based software as well as rights and obligations of both parties.
What exactly is a SaaS Agreement?
The typical SaaS model involves the supplier of software hosting and managing the software being supplied; the customers make use of the software from remote locations by paying a periodic fee for using the software. In contrast with customary software licensing deals, in which a customer receives a copy of the software that can be installed locally, the SaaS model grants a limited license for access and usage of the software.
Carefully drafted SaaS Agreements reduce the potential for misunderstandings by clearly indicating the commercial and legal aspects of the agreement. This is especially crucial for companies that operate in different countries, are required to handle sensitive customer information, and are involved in providing technology solutions to the masses.
Important Parts of The SaaS Agreement
- Services in the Agreement
The agreement must include the exact information related to the software services rendered which may consist of features, functions, number of users allowed, storage size, text description on technical characteristics, and other additional services provided by the provider.
Receiving clear information about the scopes of the services guarantees that the customers understand what package is included in their subscription.
- Payment and Subscription Conditions
The SaaS agreement has to express the conditions of subscription, price, amount of payment, payment methods, type of taxes applied, renewing conditions, and consequences for delays.
Additionally, it has to give an answer about whether the subscription price is refundable. The conditions of the revision of the price at the moment of renewal should also be stated clearly.
- Rules on User Access
The SaaS platforms are being accessed online, that is why the rules concerning the persons allowed in the usage of the software are to be stated in the document.
- Intellectual Property Rights
The software used by SaaS organizations, as well as its source code, trademarks, designs, databases, and other property, is an invaluable asset of such businesses. This is why the contract must indicate that the ownership of the software and the intellectual property in question belong to the provider unless stated otherwise.
The clients are usually granted only a limited right to access and use the software in question according to their agreement.
- Data Protection and Security
Data protection is among the most critical elements of SaaS associations. Therefore, the agreement must mention data collection, processing, storage, security, deletion, or return.
When personal data is being used, the parties should make sure that the agreement complies with the legislation in the field of data protection and privacy. Depending on the type of services provided, it may also be needed to set up a separate DPA.
- Service Levels and Technical Support
Clients frequently wonder what minimum guarantees would be provided by SaaS companies with respect to organization’s availability and technical support. Therefore, SaaS agreements may contain clauses on uptime, scheduled maintenance, service interruption, response time, and support channels.
In case there is a need for enterprise-level services
- Confidentiality
Throughout their relationship, both parties may impart some sensitive commercial, financial, technical, or business information. The proper confidentiality provisions protect such information from unauthorized use or difficulties.
- Limitation of Liability and Indemnity
Technology services have risks related to IT outages, loss of data, cyber-crimes, and third-party claims. The following agreement should state the liability of each party appropriately, specifying what cases will not be covered.
Indemnity provisions can also be included, assigning the responsibility for some specific third-party claims.
- Termination and Data Exit
The agreement should stipulate under what conditions either party can terminate the contract. The issue of what happens with customer data after termination should be addressed as well.
Why Is It Necessary to Have a Well-Compiled SaaS Agreement?
A well-compiled SaaS Agreement provides guarantees in legal terms and helps manage risks within the business process. At the same time, it preserves the property rights of the SaaS provider and offers due communication to its clients regarding the services they receive.
A professionally drafted SaaS Agreement should therefore be tailored to the nature of the software, the business model, the type of customers, and the jurisdictions involved.
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