Enterprise software and IT services have become increasingly vital to companies—and increasingly available over the internet. Such services are governed by SaaS, PaaS, and IaaS agreements. If your company is looking to subscribe to cloud services—or provides them to consumers—these contracts must be negotiated carefully in both parties’ best interests. Working with a contracts lawyer from the Priori network may help you to ensure that such vital business relationships are as effective as possible.
What Are SaaS, PaaS, and IaaS Agreements?
While licensing was once the most common way to provide software and other IT services to companies, cloud computing technologies make it possible to provide the same technology through sophisticated subscription services delivered over the internet. Software-as-a-service (SaaS), platform-as-a-service (PaaS), and infrastructure-as-a-service (IaaS) form a multi-layered framework, wherein SaaS is accessed directly by consumers for a variety of functions, PaaS provides the framework for SaaS applications, and IaaS provides the hardware needed to support both.
As traditional enterprise software has evolved into cloud computing and service-based models, so have the contracts for their use. SaaS, PaaS, and IaaS agreements are contracts designed to govern the relationship between the technology provider and the customer, taking into account the new issues raised by the legal issues most relevant to cloud computing.
Software-as-a-service agreements, or SaaS agreements, lay out the terms and conditions of a software delivery model through which software and data are hosted centrally and accessed by users over the internet. Sometimes SaaS includes fairly heavy service elements, while other SaaS agreements simply provide end-users access to products that alternatively can be licensed in a traditional manner. In the SaaS model, data is uploaded into the system and saved in the cloud. No additional hardware or software is needed.
Platform-as-a-service agreements, or PaaS agreements, govern the use of platforms where SaaS applications can be created and hosted. Essentially, PaaS provides developers with the necessary tools to create, test, host, and maintain the SaaS applications they create. For this reason, many PaaS agreements are more technical in nature than SaaS agreements—the end user is not the same. Still, the basics remain unchanged. PaaS agreements tend to be used for both basic development platform functions, such as application hosting, development, testing and deployment environments, and other integrated services, such as database integration, security, and storage.
Infrastructure-as-a-service agreements, or IaaS agreements or “hardware as a service” contracts, allow consumers to outsource their hardware needs through IaaS providers who connect their physical data storage centers or processors to the cloud. All the physical equipment is owned by the IaaS supplier, who also runs, maintains, and houses the infrastructure in a central location. The end users can access the hardware through the cloud for their operations needs. IaaS agreements are in many ways more like rental agreements than SaaS and PaaS agreements.
Key Terms and Provisions
While each individual SaaS, PaaS, or IaaS agreement will have unique needs and different clauses depending on the relevant products, services, and industries, all cloud computing service agreements will have certain key terms and provisions in common. The following are some of the most important clauses that cloud service agreements share beyond the boilerplates:
- Subscription Plan and Model. These provisions specify exactly what is included in the subscription plan and how the services will be delivered.
- Performance Objectives. These provisions detail what end users can expect from the service, including relevant results and guarantees—as well as what cannot be promised.
- Pricing. Because these types of agreements use a subscription model, payment is usually expected on a monthly, quarterly, or yearly basis. Pricing for these payments must be established, including when the company has a right to change such costs.
- Users and Access Rights. Most SaaS agreements have a metric that limits access to a certain amount of data or a number of users. This section clearly lays out that metric, including defining a user and establishing penalties for abuse.
- Service Level Agreement (SLA). A cloud service agreement usually also includes the SLA, which sets a minimum performance standard for the SaaS, usually related to availability of service. This is where a service’s uptime percentage will be set for services critical to business operations.
- License Scope. This clearly defines and limits the rights transferred to subscribers.
- Limitation of Liability. These provisions detail damages available and sometimes effectively caps contractual liability.
- Data Ownership: A vital part of cloud service agreements, data ownership establishes who has the rights to data entered into the software or platform.
- Data Security. This section details the security protections offered and encryption responsibilities, establishes where data is stored and how often it will be backed up, clarifies what will happen to data in the event of a security breach, bankruptcy, or termination of service use, and generally makes representations as to security of entered data. This is especially important in consumer markets for legal reasons.
- Customer Service and Support. These provisions establish how support for the services will be provided, response time, and additional service guarantees.
- Master Agreement Language. Most cloud subscription agreements also include language making the document the master agreement for all services offered, so that if a customer wants to change or renegotiate services provided, a full new contract does not have to be signed or negotiated.
- Rights to Physical Copy. Generally, there is no right for customers to have a physical copy of the software in a SaaS agreement, which is stated.
- Term, Termination and Renewal. These clauses establish the term of the agreement and processes to terminate or renew a service. Most SaaS, PaaS, and IaaS agreements have evergreen renewal, which means that the agreement is automatically renewed for another term unless the customer terminates the agreement prior to an established date.
How do SaaS, PaaS, and IaaS agreements differ from each other?
The products provided through SaaS, PaaS, and IaaS agreements are different, so the contracts for their subscriptions will accordingly differ. Overall, however, they have the same basic structure and focus.
How are SaaS agreements different from licensing agreements?
In SaaS agreements, software and other technology is provided in a subscription model as a service through the cloud. No physical goods change hands. When software is licensed through a licensing agreement, the company generally delivers the actual software to the company to use for a single (or monthly fee). The software and related hardware needed is physically installed at the company. SaaS gives end users access to the products online, which means that the structure for the agreement focuses more on permitting the use of the actual product rather than allowing its use as a service.