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Basic understanding of SAAS and SAAS Agreements

Posted on by Treelife

SAAS Products: An Introduction

Software as a Service or SaaS is a cloud-based software delivery model that licenses applications on a subscription basis through the internet. It’s one of the three main types of cloud computing, along with platform as a service (PaaS) and infrastructure as a service (IaaS). Unlike traditional software, SaaS products do not require upfront purchases or underlying infrastructure maintenance. A software as a service agreement, or SaaS agreement, specifies the parameters of a software delivery framework. Under this kind of arrangement, users will access software and data via the internet from a central location.
 A software as a service (SaaS) agreement may have extensive service components, or it may only provide end customers with access to items that are already available for traditional licensing. With the SaaS approach, data is uploaded into a system and then saved on the cloud, negating the need for extra hardware or software.

In today’s technology industry, SaaS products have become widely prominent. Its features, including cost-effectiveness, greater flexibility, low risk, an increasing mobile workforce, and customers, have led to its widespread adoption across industries such as hospitality, education, healthcare, and wellness. The demand for SaaS products has led to a massive rise in startups dealing in SaaS products.

How is SAAS different from a License Agreement?

A licensing arrangement is not the same as a SaaS deal. A business would normally provide the actual software for usage via a licensing arrangement, usually in exchange for a one-time or ongoing charge. Hardware and software must be installed physically.

Contrarily, with a SaaS deal, clients receive cloud-based access to software and other technologies without exchanging any tangible commodities. End customers will get online access to the relevant items through a SaaS arrangement. Consequently, rather than authorizing product usage as a service, which would allow the licensee to install and execute the software on their own servers, the form of a SaaS agreement concentrates on allowing the use of a product, i.e., offering access to software housed remotely.

Components of a SAAS Contract 

SaaS agreements serve a purpose when a business decides to license software rather than purchase it. In contrast to the conventional method, which sold software as a whole to an organization and installed it on servers on their premises, SaaS suppliers grant access to software and other technologies through public, private, or hybrid clouds.  Although the nature, structure, and requirements of SaaS contracts are generally similar, the particular services, service level agreements, and obligations might differ depending on the technology or service being provided.

Difference between a SaaS company and a Software company

The main difference between a SaaS company and a software company is that a SaaS product is hosted on a cloud server, while the software is sold in a pre-packaged form. This technology eliminates the need for an end-user license to activate the software and any infrastructure to host the software. Instead, the SaaS company hosts its membership in the form of a subscription. The customer only needs to log into their account and get complete access. Any software company that leases its software through a central, cloud-based system is said to be a SaaS company. The basic distinguishing factor between a mainstream software company and a SaaS based company is the method of delivery. 

SaaS Business Model and its Benefits

The SaaS business model is basically a delivery model and is not just about selling software but also being a full-fledged service provider. This involves not just selling the product but also customer retention for the foreseeable future.

SaaS companies can follow a Business to Business (B2B) approach or a Business to Customer (B2C) approach. In the B2B approach, the SaaS company sells its products and services to other companies, helping businesses operate more efficiently and effectively with highly automated technology. The B2C model focuses on individual customers, providing them ease of access to the software and products online, taking into account the exact user requirements.The SaaS business model offers several benefits, including cost-effectiveness, recurring revenue, and ease of maintenance. It also allows companies to optimize their sales, marketing, and customer care services to enhance performance and generate more revenue.For startups and small businesses, the SaaS business model is a cost-effective solution that eliminates the need for prompt customer support and various operating systems and devices. Instead, the product should only support different web browsers. 

SAAS Terms and Conditions 

A Terms and Conditions document for your SaaS application will help you better manage it while also reducing the reasons why users may file lawsuits against you. It is a legally significant document that every SaaS application should own. Having a Software as a Service (SaaS) Terms and Conditions agreement is crucial, regardless of how long your business has been in operation or if you’re a startup offering your first product.Legal conflicts may have been averted by those who do not have a Terms and Conditions agreement or who do not include the necessary terms.In addition to all the provisions found in regular Terms and Conditions agreements, SaaS terms and conditions agreements may contain additional sections or clauses specific to SaaS agreements. For instance, the majority of terms and conditions agreements include a section on acceptable behaviour on the website or app, copyright laws regarding content usage, and guidelines for suspending or cancelling a user’s account. Information about a SaaS’s licence agreement, reseller agreement, and subscription agreement may also be included in the Terms and Conditions document.
 A Service Level Agreement (SLA), which outlines the service level a customer may anticipate, the metrics used to assess it, and the potential remedies in the event that the firm falls short of these expectations, may also be included in some.

Negotiating a SAAS Contract 

The topic of SaaS negotiation is seldom explored due to the fact that SaaS providers do not publicly promote their willingness to negotiate SaaS contracts. Instead, they utilise sales techniques to convince SaaS consumers that they’re receiving a fantastic deal, or they brag about pricing transparency on their websites. Negotiations are not limited to multi-year contracts at the corporate level. Small and medium-sized business SaaS purchasers have the option to bargain for specific conditions in their master services agreements, software licence agreements, and service level agreements (SLAs). Software negotiation strategies can be used to get improved support services, warranties, liability restrictions, and other pertinent contractual provisions.

White Label SAAS Agreement 

The terms and conditions under which the provider offers the customer Software as a Service (SaaS) are outlined in a white label software agreement. It must to contain the supplier’s liability limitations and disclaimers about the SaaS solution. It also lays out the service level agreement that the supplier has promised to adhere to.

SAAS products and the Indian market

The Indian market is a great avenue for entrepreneurs to create a lucrative source of revenue by developing SaaS products. Indian entrepreneurs have competitive advantages over their global peers as they have access to a wide pool of skilled talent at a relatively lower cost. By 2025, the Indian SaaS market is projected to capture 8-9% of the global market and generate revenue of $30 billion.

The pandemic has also enhanced the need for software and tools that empower businesses by connecting and servicing customers, amidst physical limitations and being located in different parts of the world. SaaS is actively replacing other extraneous software segments like enterprise resource planning (ERP), customer relationship management (CRM), and point-of-sale (POS) systems.

A few examples of Indian SaaS companies include CleverTap, PingSafe, AppSecure, Zoho, WebEngage, Freshworks, Dukaan, and Talview.

Conclusion on Demystifying SaaS Agreements: A Concise Guide

A SaaS agreement is a roadmap for your journey with a cloud-based software service. It outlines the rights and responsibilities of both you (the customer) and the SaaS provider. Covering everything from payment terms and data security to service availability and user access, it ensures a smooth and mutually beneficial relationship.

  • SaaS Agreement/Contract/Software as a Service Agreement: These terms are interchangeable, representing the legal document governing your SaaS usage.
  • SaaS Agreement Template/Sample/Standard Agreement: These provide a starting point for drafting your agreement, often tailored to specific service types.
  • SaaS Terms and Conditions/License Agreement: These define the permitted uses and limitations of the software, often part of the broader agreement.
  • Negotiating SaaS Contracts: Don’t be afraid to discuss and adjust terms like pricing, support levels, and termination clauses to fit your needs.
  • SaaS Reseller Agreement: This enables you to resell the SaaS service to your own customers under specific conditions.
  • SaaS Service Level Agreement (SLA): This sets expectations for service uptime, performance, and support response times.
  • SaaS User Agreement/EULA: This outlines the acceptable use of the software for individual users within your organization.
  • Types of SaaS Contracts: Different terms might apply depending on your industry, service type, and business model (e.g., B2B, white-label).
  • SaaS License Types: These define the scope of your access and usage, such as per user, per feature, or by volume.
  • Templates and samples are helpful starting points, but customization is crucial.
  • Negotiating terms is often possible, so don’t hesitate to advocate for your interests.

By understanding these key terms and approaching agreements with clarity and awareness, you can navigate the world of SaaS with confidence and secure a contract that benefits both you and your chosen provider.


FAQs on Understanding SaaS Agreements:

  1. What’s a SaaS Agreement?

A contract outlining service terms, responsibilities, and rights between you and a SaaS provider.

  1. What do I need in a SaaS Agreement Template?

Essentials like payment terms, data privacy, service levels, warranties, and termination clauses.

  1. Can I use a Free SaaS Agreement Template?

Use with caution! Consult a lawyer for complex needs or sensitive data.

  1. Should I negotiate a SaaS Contract?

Yes! Discuss pricing, service levels, and specific needs to get a fair deal.

  1. What are SaaS Reseller Agreements?

For reselling another company’s SaaS product under your brand.

  1. What’s a SaaS Service Agreement Template?

Outlines specific service level guarantees and uptime commitments.

  1. What are B2B SaaS Contract Templates?

Tailored for businesses, addressing data security, compliance, and liability.

  1. What are SaaS Subscription Agreements?

Focus on payment terms, subscription tiers, and automatic renewals.

  1. What are Standard SaaS Agreements?

Generic templates, often not suitable for complex situations.

  1. What are SaaS License Types?

Per user, per feature, or concurrent user models, impacting pricing and access

 

5 Key Pointers required in a SaaS Agreement

Posted on by Treelife

In the previous article on Software as a Service (“SaaS”) Products, we understood the meaning of SaaS Products and how SaaS Agreements are different from End User License Agreements. In this blog, we will discuss the key points that should be included in any Software as a Service (SaaS) Agreement.

1. Software Subscription Model and Rights of Users:

The SaaS agreement is a software service provided over the internet. The agreement should define the scope of services accessible to the user and should specify how the SaaS product shall be accessible to the users. Such clauses should enlist all major restrictions that the users shall be subjected to and should also highlight the fact that the SaaS product shall be used only by the users and the authorized personnel appointed by such users.The Agreement should also provide for maintenance and support services that shall be provided by the service provider, and the agreement should provide that the users shall be eligible to receive all software updates and upgrades.

2. Intellectual Property Rights (“IPR”): 

The SaaS service provider should retain ownership of all IPR in the software, technology, and services it provides. The SaaS customer should retain ownership of all IPR in the data transmitted by it to the service provider during provision of services. The agreement should specifically mention that all the source code remains owned by the SaaS service provider.  The SaaS customers should also grant the SaaS service provider the right to use their testimonials for the duration of the SaaS agreement, for which purpose, the service provider may display the customer’s logos and other copyrighted information on its platform.

3. Subscription Plan, Model, and Pricing Clause:

The agreement should provide what exactly the subscription plan includes and how the provider will provide the services. The agreement should clearly specify regarding pricing, how and when the detailed costs would be charged. As SaaS agreements typically practice a subscription model, customers shall pay the provider on a regular basis for continued use of the service.

There are several pricing models, viz:

  • Flat-rate pricing, wherein the customers may avail a single product, a single set of features, and at a single price.
  • Usage-based pricing, which is a pay-as-you-go model
  • Tiered pricing, wherein the customers may avail multiple “packages,” with different combinations of the features provided at different price points
  • Per-user pricing, wherein a single user pays a fixed monthly price; if another user is added, the price doubles, and so on
  • Per-active-user pricing, wherein it does not matter how many users are registered, only those who actually use the platform will be charged.

4. Data Security Provisions

The degree to which any particular data security provision, laid down in a SaaS agreement, is appropriate or realistic depends on the specific type of information to which it applies, the definition of “data security incident,” the specific obligations that arise in the event of a data security breach. SaaS agreements should include a privacy policy that details how the provider is using the customer’s data, including the information it collects and shares internally or with third parties. This section shall also include information on data encryption, how data is backed up, and the provider’s roles and responsibilities in the event of a data breach or a security issue. Data security terms should also cover systems, procedures, and consequences relating to data breaches by way of a commitment to data protection through the service provider.

In India, Rule 4 of the Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011 requires every body corporate which collects, receives, possess, stores, deals or handle information of provider of information, to provide a privacy policy for handling of or dealing in personal information including sensitive personal data or information and to also ensure that the same are available for view by such users who has provided such information under lawful contract.

The policy shall be published on website of body corporate or any person on its behalf and shall provide for:

  • Clear and easily accessible statements of its practices and policies; 
  • type of personal or sensitive personal data or information collected under Rule 3 of the Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011;
  • purpose of collection and usage of such information; 
  • disclosure of information including sensitive personal data or information as provided in Rule 6 of the Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011; 
  • reasonable security practices and procedures as provided under Rule 8 of Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011.

5. Limitation of Liability and Indemnification Clause

SaaS agreements should include a limitation of liability clause that limits the liability of the service provider in the event of damages or losses incurred by the customer. Indemnity provisions, which usually accompany provisions relating to limitation of liability, are a contractual promise by one party to compensate and/or defend the other party from the risk of harm, liability or loss.The agreement should also include an indemnity clause that requires the customer to indemnify the service provider for any losses or damages resulting from the customer’s use of the service. In SaaS agreements, the Indemnity clause shall apply in case of claims, damages, liabilities, costs and expenses, including reasonable attorneys’ fees, arising out of:

  • any breach of representation and warranties by the other party;
  • an act of gross negligence, fraud or for infringement of IPR by the other party.

In conclusion, SaaS agreements are crucial for establishing a relationship between a service provider and a customer. It is essential to ensure that all these key points are included in any SaaS agreement to avoid any future legal disputes and to establish a strong business relationship. plan, model and pricing clause, and data security provisions. These clauses help protect both the provider and the customer and ensure that the SaaS product is used legally and securely.

 

Understanding SaaS or Software-as-a-Service

Posted on by Treelife

SaaS or Software-as-a-Service is a software distribution model in which a third-party provider hosts applications centrally and licenses them to customers over the internet on a subscription basis. It is one of the three main categories  of cloud computing-based services, alongside Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS).

Pros and Cons of SaaS

SaaS has turned out to be quite helpful to organizations in terms of flexibility and cost-effectiveness, enabling businesses to provide efficient software-based services to large customer bases, using the widespread and ubiquitous availability of the cloud. However, recent stories around hacking and data leaks have shed light on the vulnerability of centrally and cloud-hosted software systems. In this regard, it is essential for SaaS-based startups and businesses to have well-drafted agreements, like a SaaS contract or software-as-a-service agreement, as well as strong technical and procedural security safeguards, to protect legal responsibility and safeguard the distribution and subscription licensing of the offering.

B2B vs B2C

B2B SaaS companies offer cloud business management solutions (products and services) to other companies and businesses, while B2C SaaS businesses sell products and services to consumers directly. Both B2B and B2C are subscription-based and track customer acquisition cost, churn rate, and user lifetime value metrics. However, their marketing strategies and approaches are different.

The Importance of a SaaS Agreement

A SaaS agreement, also known as a software-as-a-service agreement, sets out the provision and delivery of software services to customers through the internet, eliminating the hassle around conventional software licensing models. SaaS agreements are serious undertakings that require careful consideration.  Once properly drafted, a SaaS agreement eliminates the hassle around conventional software licensing models. The terms in a SaaS agreement can be renewed when the subscription period expires. A properly drafted SaaS agreement is crucial to prevent disputes from arising.

Essentials of Every SaaS Agreement

Here are the essential elements that every SaaS agreement should include:

  • Subscription and grant of rights, services, and functionality: Specify the type of service that you render to the client under the agreement, as well as ensure access to the software provided to users, subject to conditions, on a case-to-case basis.
  • Data Protection: Include a clause that highlights the protection of data that will be transmitted to the providers and how they will further process that data.
  • Intellectual Property (IP) Rights: Outline the intellectual properties of all parties involved in the SaaS agreement.
  • Confidentiality Clause: Safeguard confidential and proprietary information that will be shared between the parties.
  • Indemnities: Parties involved in an agreement may suffer certain losses and/or damages for which they shall stand liable and indemnify the other party for all losses, including costs that will be incurred during the course of legal suits.
  • Disclaimer: Include a disclaimer specifying what will not hold the provider liable.
  • Limitation of Liabilities: Limit liabilities of the provider under the SaaS agreement.
  • Representations and Warranties: Include the representations and warranties of both parties in the SaaS agreement. Since the provider will usually be the data processor and the user is the data controller, both parties should have certain warranties set out in the agreement
  • Terms of Service: Set out the term based on the subscription that the user has subscribed for.
  • Force Majeure: This clause will include the course of action at the time of extreme events that can be termed as ‘act of god’ – including hurricanes, tornadoes, floods, etc.
  • Service Level Agreements (SLA): A SaaS agreement should always include an SLA that covers the provisions of technical and support services, including availability and penalties.

SaaS vs EULA

While a SaaS provides the provision and delivery of software services to customers through the internet, an End User License Agreement (EULA)  licenses the end user to use the software in a limited manner. Under SaaS applications, users do not get a copy of the software. SaaS is usually hosted and accessed through the internet, similar to other commonly-used subscriptions availed by consumers for media, gaming, and more. A well-drafted SaaS example can provide more clarity and help in avoiding legal disputes.

SaaSEULA
Full FormSoftware-as-a-ServiceEnd User License Agreement
OwnershipVendor offers the software and users access it on the internet on a subscription basis. Ownership of software is not transferred to the userSoftware is purchased by the end user. Users have all rights – including copyrights. The user can make copies of the software for personal use
Termination of UsageUser’s right to the software ends upon termination of the SaaS agreementUser owns the software and has the grant of copying, downloading and installing it but is not allowed to resell it
Licensing/AccessThe customer is usually granted an access to use the softwareThe customer is provided with the licensing of the product/software

FAQs about SaaS Agreements

Q: What is included in a SaaS agreement?

A: A SaaS (Software as a Service) agreement typically includes terms and conditions related to the usage, access, and hosting of software applications provided via the internet. Key provisions that may be included are payment terms, data privacy and security, intellectual property rights, warranty, indemnification, termination, and liability limitations.

Q: Why use a SaaS agreement?

A: A SaaS agreement is used to establish a legal relationship between the provider and the customer for the use of software programs provided as a service. It sets out the terms and conditions of use to protect the rights of both parties.

Q: What is the difference between a license agreement and a SaaS agreement?

A: A license agreement typically refers to an agreement for the use of software installed on a specific computer or server, while a SaaS agreement governs access to software that is hosted on the internet and accessed via a web browser.

Q: What is the IP clause in the SaaS agreement?

A: The IP (intellectual property) clause in a SaaS agreement addresses ownership and licensing rights related to the software and its components. It defines what proprietary material is considered to be part of the software, how the provider can utilize the software, and how the user can transfer or sublicense the software.

Q: What is the difference between a SaaS agreement and EULA?

A: A EULA (End User License Agreement) is a legal agreement between the software provider and the end-user that governs the use of software, while a SaaS agreement is a legal document that sets out the terms and conditions for the use of software hosted on the internet and accessed via a web browser.

Q: What is a SaaS agreement?

A: An SaaS agreement is a legal contract between a software provider and a customer that outlines the terms and conditions of usage and support of the provider’s software as a service.

Q: What is a SaaS reseller agreement?

A: A SaaS reseller agreement is a legal contract between the software provider and a reseller that outlines the terms and conditions of reselling the provider’s software as a service. It sets out the relationship between the provider, the reseller, and the end-user customers.

Q: How are SaaS contracts structured?

A: SaaS contracts are typically structured to include different levels of service, pricing, payment terms, constraints on usage, data privacy, warranties, and disclaimers. They may also include provisions for technical support, customization, upgrades, and the termination of the agreement. To ensure compliance with applicable legal requirements and best practices, it is important that SaaS contracts are drafted and reviewed by experienced legal professionals.

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