At Scott Bailey LLP, our Hampshire commercial lawyers advise on a range of commercial contracts to meet your SME business needs. In today’s digital world, Software as a Service (SaaS) agreements are essential for both software providers and users. SaaS is rapidly replacing traditional locally hosted software licences, offering greater functionality and flexibility.

Our IT Solicitors assist both SaaS providers, and business end-users, providing legal advice on a range of cloud based applications. Our expertise helps suppliers and developers design appropriate and proportionate agreements that protect their interests in a commercially sensible way. For customers, we can identify risks, advise on service levels, and assess third party IP rights as well as other areas of risk in the legal documentation and situation.

What is SaaS?

SaaS, or Software as a Service, is an internet-based software delivery model. In other words, cloud-based application (app) software. This is instead of purchasing a licence to host software locally, users access services via the internet. SaaS products typically offer out-of-the-box solutions for various operational needs.

Why Use a SaaS Product?

Cost Savings: Customers save money by using SaaS vendors’ multi-tenanted hosting architecture instead of investing in their own infrastructure.

Continuous Upgrades: Providers support one software version, allowing for seamless enhancements without customer-side updates.

Ease of Integration: SaaS products are easier to integrate, reducing the need for local hosting and significant hardware, software, or support team investments.

Negotiating SaaS Agreements

SaaS agreements are often sold as non-negotiable terms, in order to try and protect suppliers. However, overly supplier biased contracts should be renegotiated wherever possible by the customer. Key aspects supplier SaaS contracts should contain might include:

  • Obligations of customers
  • Limitation of supplier obligations and liabilities
  • Definition of service scope

Customers should always examine:

  • Service level arrangements (which may be within schedules or separate add-on contracts referred to as service level agreements or “SLA”) and mechanisms for dealing with subpar performance (e.g., service credits within SLA paragraphs)
  • Price increase policies
  • Business continuity and disaster recovery plans
  • Exit management and data return processes

Beyond the Agreement

End-users should consider:

  • The supplier’s financial stability and service track record
  • Disaster recovery processes and hosting redundancies
  • Dependency on the supplier for core services and potential impact of downtimes
  • Ease of switching to a new supplier and provided lead times
  • Regulatory compliance, including data protection, privacy, and sector-specific obligations

SaaS Contract FAQs

How often should I review our SaaS contracts?

All agreements should be treated as living documents, reflecting business and regulatory changes. Regular reviews every 12-18 months are recommended.

Is a Licensing Agreement different from a SaaS contract?

Whilst SaaS contracting is a form of software licensing, it is important not to use a standard licence agreement instead of a properly drafted SaaS agreement. Traditionally, software licensing referred to locally hosted software under an application service provider model, so the basis of the document may well be completely unsuitable for SaaS application.

What is the difference between Terms & Conditions and a SaaS agreement?

There may be no difference at all. Ts&Cs are the contractual terms between two parties. For enterprise solutions, businesses often negotiate a SaaS agreement, while individual sign-ups usually accept standard Ts&Cs.

Do I need a SaaS contract?

If you are a SaaS provider you should definitely have a properly drafted SaaS agreement in place for your business.

Contact our SaaS agreement lawyers

For down to earth, cost effective, legal support or guidance with your SaaS agreement, our expert legal team at Scott Bailey LLP can help. Contact us for tailored advice and assistance. Based in Lymington, Hampshire, in the New Forest between Southampton and Bournemouth, our technology solicitors are ideally placed to advise clients throughout the central south region, but we regularly advise clients across the country (not least by utilising a range of SaaS services!).

Ben Ironmonger is head of our Company and Commercial Department, and is a Solicitor with years of experience gained advising owner managed business clients within the technology sector on a range of legal matters since 2008.