The change in business-critical software from traditional on-premise to cloud has made contracts important. In the past, you would install the software in your own server environment, giving you more control over how your own data was managed. Previous software licenses were owned by the customer and could run for years without updates. Minimal maintenance fees could keep the software operational, but the software publisher had very little influence over an individual deployment of their software in most cases.
Modern software is subscription-based and increasingly being hosted in a cloud environment. Where customers were previously used to utilizing their own IT staff for business software maintenance and provisioning, today’s reality is putting that onus back on the software publisher and the cloud provider. This is incredibly valuable for the customer as it allows them to focus on operating a lean, focused business and reallocate staff to value-add functions. This also means that the software itself is running closer to enterprise-grade in availability and performance. The tradeoff is that the data and ongoing support are owned by the cloud provider, partner, or publisher. In some cases, the responsibilities are spread across all three!
While this frees up customer resources to focus on the core of the business, it does mean customers need to be clearer on how their data can be accessed, what happens if they want to change solutions, and how billing works. All of these items should be discussed openly throughout the selection process, and specifics should be determined by the customer buying team. This paper will dive into how to ensure your SaaS contract is protecting you in these areas.
As more and more software publishers embrace and move to the subscription model, understanding fees can become a significant issue. In the traditional software implementation model, fees were larger during the implementation process as customers were purchasing the license outright. On an ongoing basis, fees were small as they covered minor maintenance to support the publisher’s providing minor updates and patches. Customers considered software as a product to be purchased and then rarely thought about again.
Modern software, however, is more involved after implementation, with increasingly important updates in an increasingly connected world that relies on software integrations to support businesses. A closer review of the software contract should highlight what is covered and what will require additional fees.
Here are some of the common fee trends and how to ensure your contract protects you:
The bottom line on special promotions and “Free” services being provided for business SaaS licenses is that they are dedicated to getting more customers. This is not to say these promos are useless, but be very careful and understand what you are agreeing to by understanding the contract.
With business critical systems being moved to cloud licenses, one of the largest areas of concern, and certainly with accounting systems, is how data is managed. The good news about this situation is that modern software publishers anticipate the customer’s interest around their data in a new system and have specific language available on their website frequently asked questions section (in most cases). The other place to look is the SaaS contract itself. Look for terms like data access, termination criteria, data management, or some combination of these in the contract. This whitepaper will dive deeper into termination criteria in the Offboarding section, but we'll take a closer look at data access and data management here.
A standard SaaS contract will have sections dedicated to the components of Data Access. This term refers to how a customer accesses their data, and the cost associated with any services around accessing their data in the contract. When reviewing the contract, the customer will want to first ensure that there is stated access to their data. The next step is understanding how to access that data. Some companies will only allow you to access it after submitting a request while others will walk you through downloading your data or provide a snapshot of that data. All of these options allow for the customer's system to keep operating the day-to-day functions while ensuring them that their data is available at any time. The final step to data access is understanding any costs associated with that access. In the contract, it will say specifically if there is a fee associated with that access and either explicitly outline the costs or say that the number is available on request.
The other component of data access to consider is Data Management. This can get technical, but at a high level, the SaaS provider will have a Service Level Agreement or SLA specific to the performance of their cloud. The cloud is just a delivery mechanism supported by a datacenter, so this refers to the performance of the datacenter. One of the big reasons cloud SaaS is beneficial for business software is that software publishers can provide enterprise-level datacenter performance for customers that previously may have found that level of service cost-prohibitive. In a SaaS contract, the customer will want to identify and understand what availability, uptime, and security measures are in place, as well as how any potential data breach will be addressed. Cyber security is a massive consideration for anyone moving to a cloud environment and even more so for those with accounting, human resources, and other business critical operations hosted over a SaaS platform.
There comes a time in every business relationship to evaluate current solutions and potentially move to those more suited to the specific operations. In such an event, it is imperative that the terms for accessing customer data to be prepared for a move to a new system is clearly outlined. Put simply, when a customer needs to end their relationship with a current SaaS partner, the terms for leaving that platform need to be understood. There are software publishers and vendors that will charge large fees or otherwise make it difficult to leave their platform, and any customer needs to understand those limitations, preferably before entering into contract with them and certainly well before they need to end their license agreement to avoid any potential data loss. This restrictive access during termination is known as "ransom" in the software industry, and while it still happens, most reputable and modern SaaS licenses have clearer paths to access.
When reviewing the contract, the customer wants to look for terms including termination, user data, customer data, subscriber data, or any combination of these words. In this section of the contract, there should be clear guidelines for accessing data upon termination of an agreement. Be aware of any terms including fees, availability, and specific time-bound language. Use this to coordinate with the implementation process and go-live date of a new system to ensure there is no gap in business critical performance.
Modern business software is increasingly moving to SaaS licensing, and with that model, there are many considerations any business needs to understand. We discussed reviewing the SaaS contract for hidden fees, data access, and offboarding situations that will protect the customer and help them avoid critical mistakes we see customers face every day. As always, this whitepaper does not replace a good legal review of any contracts that affect a business, and as always, please refer to your legal team for situations specific to your business.
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