When you are selling to enterprise companies it is not very often that you’ll be able to get them to get to agree to your standard terms and conditions. This is particularly true when you are above a certain contract value (above $10,000 in contract value). This is because enterprise companies have complex and specific requirements when it comes to software solutions that have been put in place over years of procurement. It is also because, quite frankly, they can. As a startup selling to an enterprise, you have little to no leverage to have your demands met. Therefore, they typically negotiate custom contracts with your software company instead of agreeing to standard terms. We about the reasons behind this in this post.
Enterprise has unique business requirements
Enterprise companies have unique business requirements that may not be met by standard software solutions. They are taking a risk by implementing a solution that may not be proven at an enterprise level yet. And no, for them, not even the hundred current customers that you may have will tell them that it is proven. They require software that is tailored to their specific needs, and therefore, cannot rely on standard terms that may not address their unique needs. In many cases, enterprise companies require significant customization and integration with existing systems, which is difficult to achieve with off-the-shelf software.
Enterprise business is risk management
Enterprise companies are responsible for managing risks associated with their business operations and large companies are masters at this. Once a company gets to this size they have several risk management measures in place and a lot of these involve the management of legal terms. When it comes to software contracts, standard terms may not provide adequate protection or protection in specific areas for the enterprise company. Custom and redlined contracts provide an opportunity to negotiate terms that specifically address risks associated with the software solution, including data security, data ownership, and data access.
Enterprise wants a competitive advantage
This is ingrained into the DNA of enterprise companies. They are here to win. Want to make a case study or PR announcement when you bring on a large logo? Trying to hide this in your contract? A good enterprise lawyer is constantly on the lookout for this. Enterprise companies often rely on technology to gain a competitive advantage in their industry. They don’t want their competitors to know what they are doing because they want to stay ahead of the competition. Custom software solutions that are tailored to their specific needs can provide a significant advantage over competitors who rely on standard solutions. In addition, custom software solutions may help enterprise companies streamline their operations, reduce costs, and improve efficiency, which can also contribute to a competitive advantage.
Protection when things go wrong
Enterprise companies require vendors to be accountable for the performance of their software solutions. Custom contracts provide an opportunity to negotiate performance metrics and penalties for vendors who fail to meet these metrics. Standard terms may not provide adequate accountability measures, which can result in vendors failing to meet their obligations without any consequences. This is exactly why they are constantly asking for high levels around the limitation of liability for your SaaS contract. That level of liability might beat your company into the ground if it fails but they need to know that someone is on the hook if things go wrong.
Enterprise companies are often concerned about intellectual property rights when it comes to software contracts. Custom contracts provide an opportunity to negotiate terms related to intellectual property ownership, use, and licensing. Standard terms may not provide adequate protection for intellectual property rights, which can result in legal disputes and other issues. This is a fun area of SaaS contracts because you’re not selling a product you’re selling a service, so there is a lot to be careful about when it comes to IP rights.