From both perspectives—the company’s and the consumer’s—software as a service (SaaS) is an efficient platform for using and distributing a product. Cloud-based applications enable consumers to purchase functional and vital software. Companies can deliver their product and over-the-air (OTA) updates to them without the overhead of shipping and transportation. Even as sales increase, the companies aren’t forced to grow their operational workforce. SaaS lends itself to being infinitely scalable and replicable.
Reports indicate that the SaaS market will grow by more than $99 billion by 2025. As more companies and entrepreneurs utilize the SaaS market, it is crucial to understand the legal considerations that go along with it.
With the European Union’s introduction of the General Data Protection Regulation (GDPR), you cannot underestimate the importance of data collection and privacy issues. Though this is a UK law, it applies to any SaaS supplier who offers their products or services to customers in the EU, or if they monitor data originating from the EU. Cookies are a prime example of the latter. This requires SaaS companies to use well-drafted agreements for the use of their product. If they are doing business inside of the EU, then the consumer has to consent to the collection of personal data. In addition to privacy laws such as the Children Online Privacy Protection Act (COPA) and the California Consumer Privacy Act (CCPA), businesses must be conscious of how their data is transferred.
Although your product, branding, and reputation are fundamental for long-term success, the SaaS model offers a relatively low barrier to entry. Though you have a minimum viable product to push to market, don’t overlook the need for well-developed security measures to protect your consumer’s data. A robust security plan involves having a predesignated response for a data breach. Additionally, working with third-party vendors also requires companies to verify their security measures.
Service Level Agreements
Having an attorney draft your Service Level Agreement, which is commonly referred to as a SaaS Agreement, is a must because they outline the expectations for both the provider and consumer. Businesses rely on SaaS. More than half of small businesses use at least five cloud-based services. They use them to communicate, monitor employees’ hours, and pay them. In addition to security and compliance, your SaaS agreement should outline billing, uptime, quantifiable ways of measuring the service, and the penalties your company endures for failing to meet the standards you promise.
If you sell an intra-office communication tool that goes down in the middle of a workday, how much time do you have to resolve the issue? This also speaks to uptime. Generally, you should sell a product that will run 99.99% of the time. Your SaaS Agreement must detail the uptime your customer can expect, what constitutes downtime, how it is measured, and what happens if you cannot meet it.
Contact Attorneys Who Work With SaaS Companies
Inceptiv Law, Inc has extensive experience working with technology companies that offer SaaS. One of the common threads amongst our clients is not the industry they are in but the trajectory they are on. We understand the diverse needs of high-growth companies that demand their legal requirements are met in real-time. At Inceptiv Law, Inc, we want you to know that your legal is covered. For more information about how we can help you and your business, contact us to schedule a consultation.
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