26th September 2018 - Sam Gilbert

What is a SaaS Agreement?

Commonly software as a service (SaaS) cover subscription-based software models, such as Salesforce or Dropbox. These applications are usually delivered to customers via a cloud-based solution, rather than being installed as a program like traditional software methods.

SaaS applications have gained a lot of traction recently as a preferred software model for many businesses as it offers a more tailored solution to the needs of the business, rather than a one size fits all approach to software. Because of this, businesses can reduce time and costs typically associated with on premise IT personnel, as the management of the software is usually done externally (i.e. on a cloud).

Cloud services are different to software licences. Both are for software, but in a licensing agreement, the supplier gives the customer a copy of the software. In cloud services, the customer does not get a copy of the software but gets remote access through the Internet.

The cost savings for a business transitioning to a SaaS application can be significant.

Rights and Obligations of Parties to a SaaS Agreements

IN a SaaS Agreement, the customer obtains the right to access and use the software through a subscription.

Before a SaaS application can be offered to consumers, it is important that the “legals” have been constructed in order to properly define the obligations and rights of both the supplier and the customer being offered access to the application.

These considerations should include the scope of the license grant. Consider whether the SaaS offering is made available to a company or business, or whether individual licenses are offered to individual end users. In the former case, it is important to ensure that you have identified who is responsible for upholding the obligations of end users of the SaaS. If you have entered into the agreement with a company rather than the individual end users, then you should ensure that the company is held responsible for the end users of the SaaS.

Difference between SaaS, PaaS and IaaS

Consider the difference between SaaS, PaaS and IaaS. Each of these models offer slight differences in the way that they are offered, and as such may require different contractual considerations.

SaaS provides a comprehensive cloud based solution whereby the vendor is responsible and manages the model almost entirely.

PaaS (Platform as a Service) is often used as the building blocks of a Platform, and is used by developers as a platform for software development. PaaS is a cost –effective solution for developers and businesses to assist in the development of software.

Lastly, IaaS (Infrastructure as a Service) is the provision of infrastructure such as servers, operating systems, and storage of data. A good example of an IaaS offering is Amazon Web Services(AWS). IaaS provides less features than a PaaS or SaaS, which consequently enables the final platform to be more customisable or tailored to the needs of the vendor or end user.

SaaS Agreements vs Licensing Agreements

It is important to note that SaaS agreements differ from standard software . That is because software licensing agreements typically involve installation or download of the software product. SaaS applications on the other hand are accessed over the Internet.

Further, a software licensing agreement offers the customer access to the software through the offering of a licence. SaaS agreements as the name suggest offer a service. That is access to the software and usually some form of support services to maintain and update the software as necessary.

Important Considerations for SaaS Agreements

Given the increasing reliance on SaaS applications for SMBs, SMEs and larger enterprises, it is essential that SaaS applications offer clear and concise guidance to both parties delivered under the SaaS Agreement.

Depending on the type of SaaS application, there may be differing concerns that need to be addressed, including:

• A detail description of the services being offered;
• how is data being processed (i.e. who has access to customer data? who is responsible in the event of a data breach?);
• the right of access to the application (i.e. who does and does not have the right to use the application);
• the provision of updates, maintenance (including uptime and downtime), and integration of third-party tools;
• intellectual property rights;
• term and termination (is the SaaS to be automatically renewed?);
• limitation of liability;
• scalability of pricing options;
• rights of third party’s (often the SaaS application may be used by a customer’s employees);
• support services – what happens in the event of a malfunction? Consider whether support services are offered as an additional service and at an additional cost.

Take-Away Points

SaaS provides a dynamic cloud based solution for companies to update their current IT practices and save companies in time and costs.

On the other hand, it is important that the SaaS is reliable, updated regularly, and performs as expected, which may be an important factor in considering SaaS terms.

Before considering whether a SaaS application is right for your company, be sure to examine the terms of the SaaS agreement so you can be confident of your rights as a customer and the respective obligations of both parties.

Sam Gilbert, IP and Technology Consultant, B.A., LL.B  University of Technology, Sydney

 If you would like to know more about SaaS Agreements , please do not hesitate to get in contact with the team at W3IP Law on 1300 776 614 or 0451 951 528.
Disclaimer. The material in this post represents general information only and should not be taken to be legal advice.