You may also want to view our webinar “Legal Issues

Let’s start by looking at how the product architecture impacts the agreement you enter into with your end user clients.

With on-premise software the end-user license agreement…or EULA…is necessary because you are transferring the right to use the product to your client.  You are not handing over the product or the IP, simply the right to use it.

However, with a pure multi-tenant SaaS solution, you are provisioning a service, you are not transferring the right to use the software, nor the right to run it on their hardware.  The relationship will be governed by a services agreement.  Keep in mind that this is for true SaaS solutions.

If you are hosting your on-premise solution, or running it on virtual machines (VMs), you still need to license the software.

That is also true if there is client software running on the customer’s hardware – you need to transfer the right to use your software on their infrastructure.

Service Level Agreements (SLAs)

SLA’s are key legal agreements that define the relationship with your clients.

There are four main issues that the SLA should address – control, operational risk, business risk and penalties, rewards and transparency.
Carefully define the metrics that will be used – uptime, latency, response times, etc.  Make sure you are comfortable meeting the guarantees.

How you calculate performance guarantees is important.  For example, is an uptime of 99.5% calculated daily, monthly or annually?  The longer the better for you, because things tend to even out over time, while you could be severely penalized for a short-term disruption if it is measured against a shorter time frame.

Make sure that scheduled downtime is not counted against your SLA.

Clearly define your support hours.  Is it 9-to-5 in your local time zone?  Is it 24-by-7?  What about escalation, or accelerated response times?

The best thing for you, is to apply a credit against future payments, unless the penalty is so large that it exceeds monthly payments for some time to come.

Liability for privacy breaches can be a game-changer for you, in a negative sense.  The cost of covering this liability has sky-rocketed over the last few years.

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