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Top 6 mistakes made in SaaS contracting

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Top 6 mistakes made in SaaS contracting - Contract Sent

Software as a Service (SaaS) has become increasingly popular in recent years due to its convenience and flexibility. However, when it comes to SaaS contracts, it’s important to be aware of the potential pitfalls that can arise. In this post, we’ll take a look at the top six mistakes made in SaaS contracts, and how you can avoid them.

Ignoring Service-Level Agreements (SLAs)

A Service-Level Agreement (SLA) is a contract that outlines the level of service a customer can expect from a SaaS provider. This includes things like uptime guarantees, response times, and support availability. SLAs are important because they provide a baseline for performance and ensure that the customer is getting what they pay for. This is one of the common mistakes made in SaaS contracting that will cost you money.

The mistake that many customers make is ignoring the SLA altogether. They assume that the service will work as advertised, and don’t bother to read the fine print. This can be a costly mistake, as SLAs can vary widely between providers. For example, one provider might offer a 99.9% uptime guarantee, while another might only offer 95%. By ignoring the SLA, you could end up with a service that doesn’t meet your expectations.

To avoid this mistake, it’s important to read the SLA carefully and make sure you understand what you’re getting. Look for guarantees around uptime, response times, and support availability. If the SLA doesn’t meet your needs, consider looking for a different provider.

Failing to Define IP Ownership and Access

Data is the lifeblood of any SaaS application. It’s what you use to run your business, and it’s what your provider uses to provide their service. However, many SaaS contracts fail to define data ownership and access, which can lead to problems down the line. It’s one of the mistakes made in SaaS contracting that can cause a lot of issues especially if you bring on funding.

For example, what happens if you decide to switch providers? Do you get to take your data with you, or does the provider retain ownership? What happens if the provider goes out of business? Will you still have access to your data?

To avoid these issues, it’s important to define data ownership and access in the contract. Make sure you understand who owns the data, and what rights you have to access it. If you’re not comfortable with the terms, consider negotiating for more favorable ones.

mistakes made in SaaS contracting

Overlooking Security and Compliance Requirements

SaaS providers are responsible for securing their applications and protecting customer data. However, not all providers take security and compliance as seriously as they should. This can lead to breaches and other security incidents that can put your business at risk.

To avoid this mistake made in SaaS contracting, it’s important to make sure that your SaaS provider is meeting all of your security and compliance requirements. Look for providers that have third-party certifications like SOC 2 or ISO 27001, which demonstrate their commitment to security. Additionally, make sure that the provider is willing to sign a security addendum that outlines their security responsibilities.

Neglecting to Plan for SaaS Contract Renewal

SaaS contracts are typically renewed annually or on a multi-year basis. However, many customers neglect to plan for contract renewal, which can lead to unexpected price increases or service disruptions.

To avoid this mistake, it’s important to plan for contract renewal well in advance. Understand when your contract is set to expire, and start negotiating with your provider several months in advance. This will give you plenty of time to explore other options if necessary, and to negotiate a favorable renewal agreement.

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Not including provisions for customization and integration

Another mistake made in SaaS contracts is not including provisions for customization and integration. Customization refers to the ability to modify the software to meet the specific needs of the business, while integration refers to the ability to integrate the software with other applications.

To avoid this mistake, it’s important to work with the provider to define provisions for customization and integration in the contract. This should include details on what types of customization and integration are allowed, as well as any fees or restrictions associated with these activities.

Not negotiating SaaS pricing and payment terms

One of the last big mistakes made in SaaS contracting is failing to negotiate pricing and payment terms. While SaaS contracts are often more cost-effective than traditional software licenses, it’s still important to negotiate pricing and payment terms to ensure that the business is getting a fair deal.

To avoid this mistake, it’s important to work with the provider to negotiate pricing and payment terms in the contract. This should include details on the pricing model, any discounts or incentives, and the payment schedule. Additionally, it’s important to include provisions for price increases and renewals to ensure that the business doesn’t have to justify these when a renewal is occurring.


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A contract management system built for startups to manage, negotiate and report on their SaaS contracts.

Contract Sent is not a law firm, this post and subsequent pages on this website do not constitute or contain legal advice. To understand whether or not the ideas and guidance on the Contract Sent website is applicable to your business, you should consult with a licensed attorney. The use and accessing of any resources contained within the Contract Sent site do not create an attorney-client relationship between the user and Contract Sent.

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