Are You Satisfied with Your SaaS Contract?

Software as a Service (SAAS) has become the standard for software delivery and integration. While the old paradigm of installing source code and purchasing license agreements to run software on your own servers is a phenomenon of the past, there is still much to be considered from the ease of utilizing software via an internet or other network connection.

Your SaaS contract spells out how your software is to be used by your company, and it outlines the expectations for both you and the service provider. However, SaaS contracts are not boilerplate. You have every right to negotiate anything and everything.

If you have chosen a SaaS company, here are a few important things to consider:

Get What You Want – And Opt For More

Much like installed and licensed software, SaaS can be purchased and utilized in modules or components.

For instance, say you are purchasing an accounting SaaS. You would be paying too much if it came with every possible component or feature, but you only utilized a few of them. That is why a SaaS company allows you to choose features you need.

Say that you just need the general ledger, A/R, A/P, reports, payroll, and invoicing. You can then opt to buy up when you need additional features like sales, inventory management, capital asset management, cost accounting, etc.

Support and Maintenance

Unfortunately, there will be times when your SaaS product is not working properly. Or you may have a special project which includes your SaaS. Or you may simply have a question about how your SaaS works. Who will you contact?

You should insist that your SaaS contract must include a clause for maintenance and support. Spell out clearly when the SaaS company should be available, including days, hours, nights, weekends, etc. It should also include how and whom to contact for emergencies or escalated issues, and even how an issue will be escalated.

Do be aware that the more you put your SaaS provider on call and available, the more you will have to pay.

Liability

What if the SaaS provider makes a mistake? What if there is calamity or disaster with their servers? Are you protected if your company loses data?

Liability is a common issue, and a liability clause should be included in your contract so you are protected should you lose valuable data or revenue due to negligence on the part of your SaaS provider.

Escape Clauses

Situations may arise where you need to modify or even relinquish your SaaS contract altogether. Consider the following:

  • Price modulation – You may determine at some point down the road that you are not using all the modules for which you are paying. Include an escape clause that allows you to re-address your pricing structure while your contract is active.

  • Termination due to provider action – At some point, your SaaS provider may move their entire location and equipment to a different location that does not suit your needs. Or they may make changes like outsourcing their data servers after your contract is in place. Keep a clause in the contract that allows you to address these issues and walk away due to certain actions.

What About Undesired Service Provider Situations?

What happens if the SaaS vendor goes away, is acquired by another entity who won’t support the software, goes bankrupt, or simply discontinues the software? What would happen to your business?

You can negotiate in your license contract to operate the software yourself in such instances. Whereas in cases of software licensing, a client can negotiate a “code escrow” in the contract so that if any of these instances happen, the client can get access to the source code.

However, with SaaS, you need to build in your own protection. Consider negotiating the following:

  • Acquisition – If a SAAS company is acquired, put into your contract that the acquiring company must run the application under the same terms for the duration of the contract. This is also a good thing for the acquiring company because they know they have a built-in source of revenue.

  • Data Restoration – If the SaaS company stores your data, how will you get it back? Be sure you clearly outline in the contract how and when your data is returned to you.

SaaS can be a great and cost effective way to utilize outstanding software. However, be sure you protect your company to save money, data, and get the most from your SaaS provider.

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