The return of Glasgow Tech Week feels like the right moment to talk about the unsung hero of successful business relationships, the contract. A well constructed one can act as the “pre-nup” for professional relationships, defining obligations, who owns what, covering worst-case scenarios and outlining exit plans. However, find yourself a few years down the line without one outlining who is entitled to do what and when, and you could end up paying professional “alimony” for something that could easily have been avoided. Understanding the importance of the contract, particularly in a software-as-a-service (SaaS) relationship, is crucial. Our team here in Glasgow advises both sides of the SaaS relationship; the businesses buying tools to grow, and the providers building them. Here is what tends to matter most to both parties.
What should SaaS licence terms cover?
Checking whether the licence covers the number of users, sites and affiliates you actually have. This sounds simple but can end up being costly (and blowing up that carefully agreed internal budget) if not properly considered. For providers, a tightly drafted scope will protect the revenue model but such scopes should be clear rather than restrictive. Vague usage caps and surprise overage charges are a one-way ticket to souring relationships and tanking reputations.
How should liability be handled in a SaaS contract?
Everyone wants to cap liability but it’s important to look past the point-scoring that often happens in negotiations and understand what the result of such caps actually mean in reality. For example, accepting a general cap set at "fees paid in the last month" can sink any hopes of recouping potential costs incurred from a data breach. So figure out where the pinch points of your business are and make sure your liability position is reflective of the realities of the services being provided. Getting sound legal advice from an advisor that understands your needs and risk profile is essential.
SaaS service levels, uptime and customer remedies
Uptime promises from providers mean little without a remedy the customer can rely on. Making sure service levels are clear, robust and workable is important. Clear detail regarding exclusions of maintenance and the operation of service credits can make the commercial negotiation process much smoother. And from a supplier point of view, over promising and under delivering is worse than having a modest SLA that is always met.
Planning for SaaS contract termination and exit
Although it can feel premature or contrary to the budding business relationship to discuss the details of termination and exit, the best time to plan your exit really is before you commit. Termination rights need to be clear and, to avoid becoming dependent on a service, its use and disengagement needs to be thought about upfront. Things like having a defined data export format and a transition period so you don’t end up losing years of records feels obvious but if you’ve not got it written down and agreed, exiting the relationship can turn into a headache. A lot of SaaS products will develop and change during the cortact life (as can their cost) so having a workable means of getting out is important.
Review your SaaS contract before signing or renewing
Ignore the fine print at your peril. Read it before you need it. And if you spot us at Glasgow Tech Week, we are always happy to talk shop; ideally before you sign, not after!
Our specialist IP team and Commercial team based in Glasgow brings a depth of knowledge and expertise in advising companies on SaaS agreements from both sides of the table, so please do get in touch if you think your contract terms could use service check before you sign or renew.
