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Every Company is a Tech Company: SaaS & On-Premise Software Contracts

It used to be that businesses were either in the technology space or they weren't. You were either selling hardware or software or you were in a completely different, distinct industry altogether. Now, those lines aren't just blurred - they're pretty much obsolete. Any successful company, no matter what the service or product sold, is undergoing a digital transformation to become technology-enabled. It's simple: level up or get left behind. 

Whether you're implementing a new Customer Relationship Management (CRM) system for your Sales team, adopting new accounting software or developing a customer-facing application like an online learning system, you need to have a basic understanding of the technology agreements that sit behind them.

Here is a breakdown the basics of two technology agreements that are likely to affect most businesses: the SaaS Agreement and the Software License Agreement. Here's what you need to know. 

1. Type of Agreement

First things first. A SaaS agreement takes the form of a contract for services and a on-premise software agreement takes the form of a license agreement. Seems straightforward enough, but here's why. 

A SaaS ("Software-as-a-Service") solution is software that is delivered via the internet and hosted on cloud servers. The "as-a-service" element refers to the fact that the hosting and maintenance services are provided by the SaaS company versus locally by the end-user. 

With an on-premises software product, however, the user purchases a license (or multiple licenses) and installs it locally. Unlike SaaS, the customer is now responsible for the maintenance and administration costs of the software. 

2. Data Security Considerations

In a world laser-focused on data privacy, the security of information is paramount. SaaS solutions store data in the cloud, which means a customer is dependent on the strength of the SaaS company's data security programs and processes to protect sensitive information, such as customer data. 

On premises solutions afford a business customer direct control over the system. However, some businesses may find that the level of security against a possible cyber breach is actually higher with the SaaS solution than what they could create with their own infrastructure. 

3. Support and SLAs

For both SaaS and on-premise software, negotiating support from the vendor will be essential. Businesses should seek to obtain a certain level of responsiveness and customer service (for example, 24 hour support). In particular for SaaS where the business customer has no control over performance, negotiating SLAs (Service Level Agreements) in the SaaS contract will be critical. Examples would be a commitment to satisfactory "uptime" percentage levels and customer recourse for interruptions (such as a refund on the cost of x hours above and beyond routine downtime). 

So which is best? SaaS and on-premise software each have their pros and cons. Being relieved of infrastructure expenses generally creates a lower overall implementation cost, making SaaS a highly-attractive option. However, for companies who want more control over the software and a need to integrate a high level of customization to fit their business needs, on-premise may be the best fit. 



Isabel Gram