What is a SaaS Agreement?
A Software-as-a-Service (SaaS) Agreement is the agreement a SaaS provider makes with their customers to set out the terms under which SaaS software may be accessed and used.
How to create a SaaS Agreement
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What is a SaaS Agreement?
SaaS stands for Software-as-a-Service. A SaaS contract is used when agreements are made between SaaS providers and their customers. It contains the terms and conditions on how the software can be accessed and used by end users. It is most typically for larger-scale SaaS deployments and enterprise arrangements where it is of vital importance to have a clear and legally binding agreement.
What is SaaS?
If you’re considering drafting a SaaS Agreement, chances are you know what SaaS is. Put simply, SaaS is a software delivery model in which users access centrally-hosted software remotely.
SaaS is becoming the dominant force in the software market, with examples including Google’s Workspace applications, Netflix and Dropbox. And these are just examples in the public-facing sphere- SaaS is also increasingly used across different industries, covering customer relationships, management, HR needs, and more.
When is a SaaS Agreement used?
Traditionally, software was sold to businesses as a whole package and installed on servers within specific premises, however companies these days can choose to simply license the software instead of getting the entire software for themselves. With the rise of White Labelling, software companies began using cloud computing to provide access to software and technology. SaaS agreements come into the picture in these cases.
SaaS Agreements are also more commonly used in big projects to ensure homogeneity of use terms between different users. By their nature, a lot of SaaS applications will have users globally, and whilst different levels of service may be offered, the basic terms and conditions on which these users access the application needs to be the same.
What should a SaaS Agreement include?
A SaaS agreement should cover these areas:
- Duration of the subscription: The minimum duration of the subscription before the user can cancel the service. You may also hear this referred to as the ‘commitment period’, and the length of this will depend on the type of SaaS and the business strategy of the developer.
- Cancellation Terms:These are the terms under which the Agreement can terminate, including violations and terms of fair use. The terms might include:
- Duration of a minimum commitment period
- Scope of license
- Limitation of liability
- Ownership and security of data
Conditions of the Service-Level Agreement (SLA)
Typically, basic SaaS solutions make it easy for customers to come and go. However, enterprise-level commitments usually have more extended commitment periods and stringent cancellation policies due to the upfront work necessary in tailoring the SaaS for the customer’s business.
Service Level Agreement (SLA):
SLAs are typically reserved for enterprise clients who make large upfront investments on the platform. An SLA must include minimum levels of expected service. Typical SLA metrics are:
- Response time to requests and problems
- Support hours and channels for making help requests
- Unscheduled downtime limits
These commitments must be measurable and reportable to customers on request. Typically, if there is a failure on the platform or a violation of service levels, the vendor should provide a remediation plan.
Usually, there are penalties such as service credits or refunds for breaching an SLA, amount of upfront and recurring subscription fees. Most SaaS platforms will typically have a monthly service fee, which can be billed monthly or annually (often at a discount).
Why use a template to draft a SaaS Agreement?
As with many tech-companies, SaaS providers can grow big quickly so it is all the more important for your SaaS Agreements to be watertight from the start. Using a template not only gives you the comfort of knowing that all of the basic terms are covered, it also enables you to better future-proof your SaaS project.
The Zegal template also features different customisable options for terms in the SaaS Agreement. Not only will this make your SaaS Agreement look professional, it will also aid you in the negotiation process of taking your SaaS project to the next level.
Is a SaaS Agreement the same as a License Agreement?
No. Whilst they often contain similar terms, a SaaS Agreement governs a customer’s use of the application (a service) whilst a licensing agreement governs the distribution of an application as a product (including eventual use of the application).
Crucially, licensing software will typically involve receiving a downloadable copy of the software, whereas SaaS instead features accessing a single copy of the software available to all users.
A software license agreement will grant limited access to a licensor’s copyrights, patents, intellectual property, and trade secrets, but a SaaS agreement will define access rights for users to use a product in the same way it presented. Further, SaaS companies don’t provide a product or installation like in the case of licensing agreement.
Luckily, whether you need to draft a SaaS Agreement or a Software License Agreement, Zegal has you covered.
Related Zegal Legal Templates
When creating a SaaS agreement, Zegal also recommends creating the following documents from our extensive template library.
- Terms of Service
Having a Terms of Service (or Terms and Conditions)helps protect a SaaS provider from potential liabilities and helps you prevent clients from abusing your services or using your services in an unlawful way.
- SaaS Software License Agreement
SaaS and Licensing Agreementsare different from one another. Under a SaaS agreement, there is no exchange of physical goods. Under a licensing agreement, the company will typically deliver both software and hardware.
SLA is designed so there is a benchmark for performance standard. It can be a standalone document as well. When coming together with a Saas Agreement, an SLA should mention response times for support and sensitive issues, details of penalties, security, and compliance along with performance metrics and KPI’s.
So, SaaS agreements pen down legal commitments between vendors and suppliers. It clarifies to both end about what can be expected and what the performance should be like. The agreement is crucial, and it tells exactly what the Saas will provide and ensures that there is legal accountability on both parties ends. SaaS agreements are complex and can have multiple layers. Hence it is important that one understands it well. Above, Netflix, Google’s Workspace applications, Dropbox are some common examples of SaaS.
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