20 key points in SaaS Contracts - Part 2

The goal of every Saas contract is to do business for the long run with the software solving all of the use cases for the customer and providing them the needed value. The value can be in terms of productivity, saving money or similar. Contracts play a very important role in growing and scaling SaaS. Long term Saas contracts help enterprise Saas companies build revenue predictability, innovate over years, reduce operational burden and become sustainable. 

Now let’s look at what are the next 10 points to consider in Saas contracts. Please refer to part 1 for the first 10 points. However, it is not mandatory to refer to part 1 before referring to part 2. So here are the next 10 points. 

11 - Timelines - When a customer decides to use a Saas product, there can be multiple timelines which come into picture. Examples of timelines are deal closing, onboarding date, training date, renewal date and more. On a mutually agreeable basis, it is helpful to add some of these timelines in the contracts. Once the timelines are added appropriate steps towards project management can be taken. 

12 - Communications - Best practices for communications are usually added in the Saas contracts. This helps in navigating and effectively executing from both parties and third parties if any of them are involved. Whom, what, how to communicate, frequency of communication and other aspects should be included. Meetings such as planning, tech, operations, steering committee are of importance in the long run … 🙋 

13 - Use of Ai - As Ai evolves and becomes an integral part of Saas, it is necessary to use Ai in a responsible way. With regards to Ai, the challenge of awareness exists. This lack of awareness creates a bit of fear and uncertainty while using Ai. 

Most of the enterprise Saas platforms use Ai on the customer data, they do not share data across the customers and deidentify the data. However, it is important to add these in the saas contract. Some of the customers expect that the saas partners are ready for an Ai audit if needed. It is advisable to build capabilities which allow configuring the Ai aspects in saas. This helps … 👍 

14 - Rights of use - It is mentioned in the saas contracts that authorised personnel, employees, consultants will use the platform. The usage should be fair in terms of both quantity and quality of transactions. There can be provisions made in the contract if penetration/ load testing or similar as expected. 

15 - Intellectual Property - There are best practices around this in most of the industries. The intellectual rights are owned by the Saas product and the data, transaction, user activity, etc. are owned by the Customer. Most of the Saas platforms which are hosted in the cloud work in this way. On-premise software also follows similar guidelines … 🎉 

16 - Data Rights - Most of the customers migrate data from their existing systems. The saas system also creates data through transactions, usage, click stream, and similar. Saas platforms need to handle the PII data and comply with appropriate data regulations. Customers trust enterprise Saas platforms who comply with GDPR, HIPAA, SOC and other related certifications. 

17 - Renewals - It is in favor of Saas platforms to put auto-renewal terms in the Saas contract. The auto renewal is usually for 1 year. This helps both the customer and saas partner to continue to serve the customer. It is important to add the 90 day notice clause in the contract so the saas partner is notified and can solve if there are challenges with the software.  

18 - Payment Terms - If the saas partner is in the market for more than 10 years and holds a significant customer base, they can demand upfront or quarterly payments. Upfront payments can also be used as a price negotiation lever. In addition to these, saas contracts also have late payment clauses, penalties, third party payments, travel, training reimbursements and so on … 💰 

19 - Termination - Enterprise saas platforms do not allow early termination unless agreed upon. Also it is not beneficial on both sides including the customer that a Saas contract is signed and then the Saas product is not used or valued upon. I understand that jurisdiction is also important in these cases. In case of a termination, waivers can also be proposed to the customers. In most of the cases I have seen, the termination is taken care at relationship level rather than legal. However, if customers are keen on handling it through legal means, Saas partners should usually agree. This takes care of market sentiment as well as future goodwill.      

20 - Warranty and Disclaimer - The customer expects that the Saas platforms will work and behave as expected. That is why it is advisable to have it in the Saas contract. In addition to these the Saas partner should have appropriate business insurance and indemnity clauses added in the contract … 🚧 

Please note that I am not a legal counsel; I am a Growth and Scale Advocate. Hope these pointers have helped you get to know about Saas contracts in a deeper way.  

If you wish to refer to 10 more points, refer to Saas contract part 1- https://www.groadv.com/post/20-key-points-in-saas-contracts-part-1

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Swagat Irsale is a Growth and Scale Advocate. He works with start ups and scale ups and helps them grow revenue and build enterprise products which users use.

You can connect with him on Linkedin.

https://www.groadv.com/post/grow-revenue-the-journey-zero-to-one-billion-swagat-irsale

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