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SaaS agreement checklist
The 9 details covered below will help you maximize the value of your SaaS solutions.
1. Start date
Every SaaS contract should have a start date that indicates when the agreement takes full effect and starts being binding for both parties.
This commencement date is also the point in time when you, the client, and all end-users, will be granted access to the provided service. Knowing the exact kick-off date of your SaaS agreement is key as all term durations refer back to this date.
2. End date
Knowing the end date of your SaaS contract is just as important as knowing its start date. It might also be referred to as the termination or renewal date of your subscription.
Anticipating renewal dates helps application owners proactively negotiate renewal terms. They make sure that the enterprise doesn’t accidentally renew a contract for a product that is not needed or used anymore.
📚 Related: SaaS Renewal Strategy and Best SaaS Renewal Practices
3. Notification length
This section can be a major pain point. The majority of SaaS providers require notification if the subscriber doesn’t intend to automatically renew a subscription.
Typically, this notification period can be as short as 15 days or as long as 90 days. Since it depends on the product, you are advised to add a renewal alert, so you never miss the window to change them.
4. Total contract value
The total contract value combines all financial commitments for each SaaS subscription across your business units.
This way, you have a good grasp of the total amount spent on the SaaS solution. It’s easy to spot inconsistencies when comparing the actual billing data to what is stated in the SaaS contract.
Knowing the total contract value, allows you to compare SaaS spend over time, detect pricing model changes, and opt out of upgrades.
5. The total quantity of licenses and license types
Another important detail to look out for in your SaaS agreement is the total quantity of licenses and license types. Ideally, you get only as many licenses as you need. These licenses are then allocated throughout the organization.
In case employees don’t end up using the software or team members exit the company, there might be excess licenses. Make sure to regularly compare active user accounts with the number of licenses stated in the SaaS contract.
6. Billing frequency
This part of your SaaS agreement outlines the billing frequency for your SaaS subscription. In combination with the total spend, this is helpful information for determining the ROI of a particular SaaS product.
Most SaaS solutions are billed monthly, semi-annually, or annually. Before deciding on a frequency, talk to your billing, bookkeeping, or financial department.
7. Consumption metrics and billing units
Identifying pricing and billing units is an essential practice for tracking and containing costs.
First, you need to determine the SaaS application consumption metric. Meaning any unit of value that determines the price and has a predetermined limit or capacity.
A consumption metric can be the total quantity of emails sent when using a marketing platform for digital company newsletters.
8. Data handling and regulatory compliance
Companies that use cloud delivery models heavily rely on data. That’s why you need to understand how sensitive data is managed when stored with a third-party SaaS provider.
SaaS contracts should outline which data protection regulations are being followed. It’s your responsibility to determine whether they meet the standards for your company and industry.
9. Other line-item details
Last but not least, it’s important to know your consumption metrics and threshold for your SaaS usage. This will prevent overages and unexpected fees. A SaaS contract should clearly define the financial consequences of exceeding these thresholds.
Depending on the SaaS tool, these items might include things like professional services, features, the total value of line items, platform details, and more.
📚 Related: How to negotiate SaaS Contracts?
Overlooked aspects of SaaS contracts & agreements
SaaS contracts tend to be lengthy and overwhelming which is why important details often get overlooked. One of your main concerns should be the fact that you are giving an off-site SaaS vendor control of your data.
Remember that a data breach could be extremely costly and put your organization’s whole reputation on the line. It is often only after such an incident, that users will check on their SaaS contract and SLAs.
Pay attention to the fine print concerning data access before it is too late – after all, it is the most overlooked aspect of SaaS contracts.
Information about data access
Traditional systems ensure that companies have sole access to their data stored on-premise. However, SaaS vendors by definition store your data in the cloud.
While it should always be clearly stated that you own the data you create, the SaaS contract should also address the following questions:
- How can you access or retrieve your data?
- Who else can access your data?
- What happens to your data when the SaaS contract is terminated?
- For how long can you access your data after termination?
Your SaaS agreement should clearly outline how long your team can access data following the termination of the contract. Typically, it's best to have access for at least 3-6 months to ensure that you'll have time to retrieve it.
In addition, make sure the contract details how you can access this data as well as the format of the data. You can either receive a data export or you can export it yourself through the SaaS API.
Whatever you prefer, make sure the format is easy to use and aligns with your company's practices.
📚 Related: Best SaaS Contract Management Practices
Conclusion
When negotiating your SaaS contracts, it's important to address each of these points. That way, you can avoid the risk of losing valuable data that is not only sensitive but also critical to business operations.
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