Software as a Service

Software as a Service Agreements

Before you sign on the dotted line with your SaaS provider, make sure you've covered your legal bases. SaaS agreements form the backbone of your provider relationship. Here are a few things to look at before signing a SaaS agreement.

Software as a service (SaaS) is a convenient and affordable way for small businesses to access sophisticated software solutions.

The potential benefits of SaaS are huge: Lower upfront costs, scalability and offloaded system maintenance are just some of the features that make SaaS a popular alternative for small business owners.

One of the keys to a successful SaaS experience is the relationship your business has with your service provider. A confused or dysfunctional relationship is a recipe for disaster. To minimize the possibility of a software nightmare, you will need to pay extra attention to your service agreement.

SaaS agreements clearly define the relationship and expectations between the hosted software provider and your company. Although agreements vary from vendor to vendor, there are several issues that must be addressed in any software as a service agreement you sign.

  • Vendor proposal. Most SaaS vendors create a proposal describing how their solution will meet your company's specific needs. This proposal should be cited in the agreement and possibly even included as an attachment.
  • Provider expertise. The agreement should also describe the SaaS provider's expertise and capabilities. If the relationship goes south, this description could be critical during the litigation process.
  • Definitions. By necessity, your relationship with the SaaS provider will be populated by technical terms and definitions. The agreement should define any critical terms that could cause confusion. If a term is borderline, ask the vendor to include a definition of it in the agreement.
  • Terms. SaaS is a subscription-based service. So the agreement should carefully describe the term of service including start date, service duration and renewal procedures as well as the minimum term of service that is required.
  • Payment. Most SaaS solutions are billed monthly and can be paid with a credit card, automatic withdrawal or traditional bill. However, the SaaS agreement should still describe the price of the service and payment procedures. Pay careful attention for verbiage that details price protections for a specified period of time.
  • Backup & disaster recovery. When you use an SaaS solution, you are trusting someone else not just with your software, but with your data. The SaaS agreement has to discuss provider responsibility for data security and storage, with special attention to backup requirements and disaster recovery.

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