Copyright laws give software owners the exclusive right to reproduce and/or copy their software for distribution. Most earlier Software licenses presumed that the party licensing the software (Licensee) would run that software on their own computer/server/PC. Most of those early software licenses were perpetual licenses, that permitted the Licensee to use the software forever. As times changed larger more powerful computers and much better telecommunications made remote computer processing (“Hosting”) much more common and often more cost effective. In addition to that shift in the computing curve, ongoing support and maintenance of the software became a larger concern for Licensees. So the focus was on the Licensee ability to effectively use the Software within their environment, rather than owning a license to use the software wile figuring out how to update and support that software separately. Today most new commercial software licenses are combined with the Hosting, Support and Maintenance in what we call Software as a Service (“SaaS). The focus of the SaaS is on time to use, a Service Level Agreements unlike the earlier on-premise software licenses. When drafting a SaaS agreement, drafters can help reduce friction in negotiations by considering the following.
Focusing on the Service, Rather Than the Software
When drafting a SaaS agreement, a license plus hosting contract model is often considered. SaaS agreements, however, should not focus on the software and instead, agreements should focus on the service. This is because customer rules of engagement are usually different when it comes to service providers, as opposed to software providers. A SaaS provider should focus on service-type issues in their agreement, which includes customization, liability, data security, and compliance with regulation.
The specs of the Service Level Agreement, or SLA, in a SaaS agreement will vary on the type of software or application provided, the severity of the support issue and the nature of that SaaS Service offering. For instance, products that demand high vendor availability like telco uptime, customers can seek “five-nines” availability of service, or 99.999% availability. On the other hand, a product such as a software for password management can usually get away with lessened levels of availability.
Creating a Quality Agreement
Creating a SaaS agreement should not be drafted from a template form, as these are not usually consistent with the business. Furthermore, template agreements will also not reflect the functionality of the product and service. All SaaS agreements should be customized to create a quality contract. This will reduce any unnecessary time and money spent in negotiating with the customer. It will also work to speed up the sale process, reduce the amount spent on legal fees, and finally, close more deals.
An Agreement Should Include Reasonable Terms
A SaaS agreement can be very detailed, but it can also be created to avoid excessive negotiations with the customer. Additionally, being clear and consistent throughout the agreement can help the business appear more professional. SaaS agreements should address important contractual issues that customers typically care about, such as:
- Customer Rights,e., the right to receive and use the service.
- Customer Obligations,e., premiums, rates, and other payment obligations.
- Service Terms, e., service termination in the event of chronic SLA failures.
- Service Commitments, e., service availability; Service credit remedies
- Data Security, e., promise to security; and
- Remedies, e., what to do in the event of a breach in contract by either party.
Work with the Support of a Qualified SaaS Agreement Attorney
Drafting a SaaS agreement with the support of a qualified attorney can streamline the process. It will also ensure that the contract is more efficient and does what is intended. Although one contract template can be used for multiple customers, there are certain aspects of every contract that will need to be specific and customized to each individual customer. Consequently, having the legal support of an experienced SaaS attorney will ensure that unnecessary mistakes are avoided. When creating a brand-new SaaS agreement or updating an existing one, speak to a knowledgeable attorney who can assist you.
Technology Attorney John P. O’Brien has many years of experience drafting SaaS agreements. SaaS agreements should expect to comply with all required state and federal laws. To protect against the potential of unnecessary liability, experienced legal support should be acquired. Consider contacting Technology Attorney John P. O’Brien today for more information.