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what are the key points to be addressed while drafting a contract for SaaS
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3 Answers
Interesting question.
I am guessing by when you say "drafting" you are effectively acting as the vendor or supplier?
If this is the case then a contract should be similar to other service contracts.
Important points to note would be uptime. For example are you able to provide a guarantee for the service? SaaS is a great concept, but reliability is key, being able to access the service is fundamental.
Support - due to the nature of SaaS companies can effectively run more complex solutions without the necessity for a system administrator. What sort of support will you offer? 1st / 2nd / 3rd?
Security is also crucial, are your customers going to be on single or multi tennant architecture, if so do they know this?
As a company that both sells SaaS technology, but also invests in it, these are the most important questions / pain points we come up against.
Hope this helps....
As Graeme pointed out, the perspective is important (are you the supplier or buyer). If you are the supplier, then the main thing I would add is to be careful with separating service features from contractual obligations. Some people get into trouble with clients by over (or sometimes under) defining their application service in their contracts.
One other thing not mentioned is depending on your solution, you probably want to address customization. What do you allow, how is it supported and how are issues handled.
It is all about the SLA and Remedies.
You have to have defined in the contract what "as a Service" means -- typically uptime, latency, and support. It should be clear to both parties what the Service Level being offered is.
Secondly, there have to be Remedies when the SLA is not met. Remedies are what make a good contract vs. a bad one. For example, if the uptime SLA is given as 99.5% (4 hours of unplanned downtime a month) but the Remedy is that you are refunded 3 cents for every month the uptime SLA is not met, that is not much of a contract. However, if the Remedy is that you are refunded 5% of the contract value for every month the uptime SLA is not met, then that is a pretty good contract.
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