SaaS Agreement

SaaS licensing

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 end users can access and use the software.

A SaaS agreement is a legally binding contract between a company providing software and its client.

SaaS services mainly concern cloud-based applications that a client may subscribe to. After the subscription, the client can access these internet-based services in exchange for a recurring fee.

The content of the SaaS agreement varies vastly based on the parties entering the contract. 

It is most typically for larger-scale SaaS deployments and enterprise arrangements where a clear and legally binding agreement is vital.

What is a SaaS Agreement?

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 license the software instead of getting it 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 typically used in larger scale or complex projects due to the increased need for clarity regarding terms of use. They focus on governing aspects such as costs, features, uptime, Usage, and analytics.

By their nature, many 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 must be the same. 

What should a SaaS Agreement include?

A SaaS agreement should cover these areas:

• Details of the subscription service: The SaaS agreement must spell out the services the customer subscribes to, including any use limitations and terms of use.
• Duration of the subscription: The minimum duration 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 developer’s business strategy.
• 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, 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. 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. 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, so it is 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, but it will also aid you in negotiating 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 is presented.

Further, SaaS companies don’t provide a product or installation like in the case of licensing agreements.

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.
• Privacy Policy
• If you collect personal information, it is always good to have a Privacy policy that spells out how you will use the client’s data. The reassurance that you will not remarket a client’s personal information without due consent is important to many subscribers. This is also vital if any GDPR provisions apply.
• SaaS Software License Agreement
• SaaS and Licensing agreements are 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’s
• SLA is designed so there is a benchmark for performance standards. 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.

Create a SaaS Agreement now

SaaS agreements pen down legal commitments between vendors and suppliers. It clarifies what can be expected and what the performance should be like to both ends.

The agreement is crucial, and it tells exactly what the Saas will provide and ensures legal accountability on both ends.

SaaS agreements are complex and can have multiple layers. Get yours right with Zegal.

Stay compliant with the Zegal template library

Zegal legal template are meticulously crafted with the precision of AI and the expertise of seasoned human lawyers, providing a unique blend of speed and reliability.

You can trust that Zegal agreements are legally sound and fully compliant with current regulations.

Whether you're a startup, SME, or a larger enterprise, Zegal contract management will automate and speed up your legal processes.

Using Zegal will reduce risk, save money, and improve efficiency. Let us take care of the paperwork so you can focus on running your business.

Don’t compromise on speed or compliance. Stay secure, compliant, and efficient with Zegal.