Negotiating a software licensing agreement is no easy task. Navigating through all the legal language and product guarantees is difficult. When negotiating a Software as a Service (SaaS) agreement, there are a few special considerations to take into account. For instance, SaaS contracts must have a service level agreement for up-time to ensure a certain level of server availability. The special considerations add up quickly and can leave one feeling overwhelmed.
To help buyers, Software Advice has put together a list of 9 key considerations to take in to account when negotiating a SaaS agreement. We thought we would share their advice on service level agreements:
Service Level Agreements (SLAs)
Regardless of what you pay for the system, reliability is paramount. The SLA is the vendor’s commitment to keeping the system up and running. It is typically expressed as a percentage of “up time.” You will almost always see the SLA represented as 99.9% or thereabouts. However, there is wide variation in how that number is calculated. Many vendors will simply start with 100% and subtract time during which their internal systems reported an error. Most of these SLAs leave far too much wiggle room for vendors.
If this new SaaS system is mission critical, push the SLA issue to see who is really ready to stand behind their service. The SLA topic is far too detailed to delve into all the considerations here, so we’ll refer you to this great blog post on SLAs. However, we’ll suggest you focus most on the penalty for breaking the SLA when negotiating. Usually these penalties are paltry discounts paid out against future purchases. Just pushing for bigger penalties will provide great insight into the reliability of the system.
For anyone that is thinking about subscribing to a web-based software system, this is a must read. The full article can be accessed by visiting the ERP Software Advice blog post at: 9 Key Points to Negotiate in a SaaS Agreement.