Key considerations for a SaaS Agreement

Key considerations for a SaaS Agreement

Key Contact: Rachelle Sellek & Declan Goodwin

Author: Rachel McCulloch

The number of businesses offering remote and flexible working opportunities has increased rapidly over the past few years. A key factor enabling these shifts in the way we work is the development of and increasing use of technology in a wide range of industries, including the move from locally installed or hosted software to cloud-based software as a service (“SaaS”) models. SaaS allows for greater flexibility when working from a variety of locations and is simpler to maintain and update.

What is SaaS?

Typically, the software is hosted by the provider in the cloud and accessed by the users through the internet. Using SaaS means that the users do not have to download, store and maintain the software themselves, and it can be accessed through any device, allowing for remote working.

SaaS can be hugely beneficial to many aspects of a business and the software they provide is varied, from design tools to accounting programmes. Some key examples of SaaS used in business includes payroll management software, customer support software, file sharing and document management software, emails and calendars.

Why use a SaaS agreement?

Where SaaS is used, an agreement should be put in place to govern the terms of its use. A SaaS agreement is a legal contract between the software provider, and the users. It provides the users with the right to use the software and so usually when the agreement comes to an end, so does the user’s ability to use the software. The software provider is also responsible for hosting and maintaining the software. This represents the service aspect of SaaS and makes the arrangement different from a traditional software licence agreement. Support may also be provided.

Whether there is room for contract negotiation will depend on the size of the software provider and the significance that the revenue from the user will accounts for. Usually, a SaaS product is a standard product and isn’t tailored specifically to the user. Similarly, the SaaS agreement may be the provider’s standard terms. However, if you do have concerns about the terms, it may be worth speaking to the SaaS provider to determine how much room you have for negotiation.

What are some key considerations when reviewing your SaaS agreement?

As with any other commercial agreement, it is important to review and, where possible, negotiate any SaaS agreement you enter into to ensure they contain adequate provisions to protect your business.

  • Data protection – It is likely the SaaS provider will be hosting and responsible for a large amount of data. Depending on the software, this may include personal data. It is essential that the SaaS agreement contains GDPR-compliant data protection provisions. These will need to cover any personal data processed by the software as well as the personal data of the people using the software. Some key questions you may want to think about is how the data is going to be protected by the provider, and who will be liable in the case of a data breach.
  • Data loss or corruption – Again, as the SaaS provider will be holding a large amount of your data, you will want to make sure the SaaS agreement contains provisions on what will happen in the case of any data loss or corruption. Some key questions for you to consider are who will be responsible for backing up the data and how often, where is the data stored, and whether lost or corrupted files can be retrieved.
  • Hidden charges – SaaS is often provided on a subscription basis, or as a pay-per-use service. This means that rather than paying for expensive software outright, businesses can pay a smaller amount on a monthly, annual or some other regular basis. You will want to check what your regular fee includes and whether there will be any hidden charges involved such as payments for the amount of data stored, updates or maintenance.

If you are in any doubt, we would suggest seeking legal advice.

For further information and assistance, please contact our Commercial and Technology Team.

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