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Negotiating a SAAS Agreement: What You Should Know

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14.Nov, 2019 0 SaaS Law

Previously on SaaS agreements, we explained what it is, what to expect and key provisions to include in it. Today’s businesses leverage several digital tools in order to make interactions seamless for both customers and staff. Some uses for Software as a Service (SaaS) solutions include email, client relationship management, human resources, and digital marketing. With this comes a SaaS agreement which you can negotiate. In this post, we will walk you through what you should know when negotiating a SaaS agreement.

Availability and Performance

Depending on the service level, there should be minimum acceptable levels when it comes to response times, round the clock availability, satisfactory use, and performance. Response times and support should be what you are most comfortable with. You should also demand a response time guarantee. Thirty minutes for emergencies and two hours for normal priority are the most common with SaaS providers.

Storage and Data Security

Negotiate for warranties regarding data breaches, loss or alteration. Verify that your SaaS provider has plans for recovery, security, and compensation. There should be plans for regular security testing, evaluation, audit, and upgrade. What plans are there for data backups? The answer to this will influence billing estimations. Warranties negotiated should not relate only to data security. Other warranties like legal compliance should be negotiated.

Pricing and Billing

Most negotiations happen around these. Special attention should be paid to potential extra costs as this is usually where costs quickly add up. If you are on a subscription model, ensure the option for renewal is not automatic, unless that’s your preference. There should be some form of prompt and approval from you first. Remember that if you ask for a discount, you can expect to also offer something in return, usually a longer subscription. Nevertheless, if you opt for a long-term subscription, say three to five years, you should negotiate for an out clause.

Liability and Indemnity

Who is liable for service failures or data breaches? Who is liable for claims from a third party? These are points to be negotiated before signing that SaaS agreement. Usually, SaaS providers cap their liabilities or indemnify only in certain circumstances. 

It’s important to note that most SaaS providers offer blanket terms for their customers. Thus, negotiating some terms could shift away from these blanket terms and shift up estimated costs. The more there is a shift (customizations), the higher the estimated costs. However, financial considerations should not be the only deciding factor when negotiating a SaaS Agreement. Ensure you involve a lawyer when negotiating a SaaS agreement.

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