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What Is a SaaS Agreement?
A SaaS agreement, or a software as a service agreement, lays out terms and conditions of a software delivery model. In this type of model, software and data will be centrally hosted and users will access the software and data over the internet.
A SaaS agreement may include heavy service elements, or it may just give end users access to products that can alternatively be licensed in a traditional way. No additional software or hardware is needed in the SaaS model, as data is uploaded into a system and then saved in the cloud.
Is a SaaS Agreement Different From a Licensing Agreement?
A SaaS agreement differs from a licensing agreement.
Under a licensing agreement, a company will usually deliver the actual software for use, typically for a single or monthly fee. Software and relevant hardware must be physically installed.
In a SaaS agreement, on the other hand, customers get access to software and other technology through the cloud, but no physical goods are exchanged. A SaaS agreement will give end users access to the products involved online. As a result, the structure of a SaaS agreement focuses on permitting the use of a product instead of allowing product use as a service.
Important Clauses Found in a SaaS Agreement
An individual SaaS agreement will have unique needs and therefore different clauses. The specific clauses in an agreement will depend on the following relevant information:
However, all cloud service agreements will share certain terms and agreements. This includes:
Access right and users:
Most SaaS agreements will have a metric to limit access to either a certain number of users or a certain amount of data. Your agreement should:
- Detail that metric
- Define what a user is
- Establish penalties for abuse
Customer service and support:
Provisions should establish:
- How you will provide support for your services
- Response time
- Any additional guarantees in terms of expected service
- Data ownership: This vital component of a cloud service agreement establishes who gets the rights to data that is entered into a platform or service.
This section is particularly important in consumer markets. The section should detail:
- Encryption responsibilities
- How often data will be backed up
- Protections offered
- Security of entered data
What happens to data in the event of:
- A security breach
- Termination of service use
- Where data is stored.
- License scope: You should define and limit the rights that you transfer to subscribers.
- Limitation of liability: You should also make any damages available clear, and you can cap contractual liability.
- Master agreement language: Most agreements will include language that makes this document the master document for all services you offer so you do not have to negotiate or sign a completely new contract every time a customer wants to renegotiate or change the services provided.
Detail what end users should expect from your service. This should include:
- Relevant results
- What your service does not promise
Pricing and when your company has the right to charge detailed costs should be established in the agreement. As SaaS agreements typically use a subscription model, you will usually get payment in one of the following ways:
- Rights to a physical copy: Most SaaS agreements state that customers do not have a right to a physical copy of the software used.
- SLA: A cloud service agreement typically also includes a Service Level Agreement, or SLA. The SLA sets a minimum performance standard for a SaaS. Performance standards are generally related to service availability. In this part of the agreement, you can set your service's uptime percentage for services that are critical to business operations.
- Subscription plan and model: Provisions should specify exactly what the subscription plan includes, as well as how your services will be delivered.
- Term, Termination, and Renewal: These three clauses should establish the agreement's term and the processes that should be followed to terminate or renew the service. Generally, a SaaS agreement will have evergreen renewal. This means the agreement will be renewed automatically for another term, unless a customer actively terminates their agreement before an established date.
Types of Agreements SaaS Companies Need
Company-level agreements for SaaS companies can include:
- Assignment of intellectual property, or IP transfer agreements
- Confidentiality/non-disclosure agreements
- Employment agreements
- Shareholders agreements
Customer-facing agreements can include:
- Master services agreements
- Purchase and sales order agreements
- Service level agreements
Third-party agreements can include:
- Advisor agreements
- Affiliate or partner agreements
- Contractor agreements
Public-facing policies can include:
- Privacy policies
- Security policies
- Trademark policies
Image via Unsplash by arifriyanto
You might hear this type of agreement referred to in the following ways:
- Terms of service
- Terms and conditions
Practically speaking, they're all the same thing.
Clauses to include in this agreement are:
- Business contact information
- Copyright and intellectual property rights
- How customers can end the service contract, including penalties should they end a contract early
- How your SaaS handles content generated by users
- Laws that govern the contract
- Licensing information
- Limitations of liability and disclaimers of warranties
- Payment term specifics
- Restrictions and/or limitations of use
Privacy Policies for a SaaS
- California: The California Online Privacy Protection Act ( CCPA ).
- Canada: The Personal Information Protection and Electronic Documents Act ( PIPEDA ).
- European Union: General Data Protection Regulation ( GDPR ).
- What personal data your service collects and uses
- How your service collects and uses personal data
- How your service stores personal data
- Whether your service shares personal data with third parties
Information about cookies:
- If cookies are used
- Which cookies are used
- Why cookies are used
How users can:
- Limit the data that is collected and used
- Withdraw consent to have their data collected and used
- Request to have data deleted
SaaS agreements are integral parts of any software as a service company. Make sure you work with lawyers who know how these contracts work when crafting yours.
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