How to negotiate a SaaS agreement

A software-as-a-service (SaaS) agreement can create a commercial relationship that lasts years. How do you negotiate to satisfy both parties?

This deep dive looks at what SaaS agreements are for, who they affect, how and why parties might choose to negotiate them, and how to make this negotiation easier. Use the navigation below to find out more, or explore our deep dives on more specific contracts, like NDAs and MSAs.

What’s a SaaS agreement? | Who do SaaS agreements affect? | How to approach SaaS agreement negotiation | How to negotiate SaaS agreements more easily? | Useful features | Learn more

What’s a SaaS agreement?

SaaS – software-as-a-service – is the business model behind B2B tech titans like Salesforce, HubSpot and Zoom. These SaaS companies provide their platforms through a subscription model that guarantees recurring revenue – rather than on-premise solutions that are bought once and installed.

A SaaS agreement is the commercial contract that sets out the formal relationship between the company and its customer. It may take the form of a contract for a pilot or trial, or it might be an auto-renewing subscription, supported by an MSA (which could be viewed as a subset of SaaS agreements). What these contracts have in common is that they facilitate the delivery of services to the customer in exchange for recurring revenue to the business.

Who do SaaS agreements affect?

Various stakeholders across the business might be involved in SaaS agreements:

  • Legal counsel will own the template and guard the business against risk, making sure versions are controlled and terms are favourable to the company.

  • Sales managers and account executives are responsible for securing signatures on SaaS agreements – and will be aiming to achieve that goal as quickly as possible. In negotiations, they’ll be focused on commercial terms such as price, billing manner and frequency, and number of users.

  • Sales operations managers typically own the process through which SaaS agreements flow – particularly the workflow is integrated with a CRM like Salesforce.

  • Approvers who need approval rights over the contract. Who these people are will depend on the company’s stage and size, but they could include customer success, product teams, finance leadership or others.

  • Authorized signatories will vary from company to company.

  • Customers are the end-user buying the software, and are a key stakeholder in the contract.

Want to negotiate SaaS agreements in-browser? Collaborate with Juro.

How to approach SaaS agreement negotiations

The degree to which SaaS agreements are negotiated can vary hugely. At a fast-growth SaaS company with a relatively low annual contract value, the policy might be to allow no negotiations at all. This is often the case for self-serve SaaS products, where buyers pay a low fixed fee and agree to the standard terms and conditions.

Towards the middle of the negotiation spectrum might be, for example, mid-market SaaS agreements that might cost between $10,000 and $50,000 annually. With these the business might expect some degree of negotiation from the customer – perhaps over discounting, data use or billing manner and frequency. 

At the top end of the negotiation scale, are larger, longer-term SaaS agreements, such as those that set out the terms of one enterprise selling SaaS to another at huge scale – for example, 10,000 licences being sold and a five-year subscription term. For these agreements, businesses might expect a high level of negotiation.

SaaS agreements can create tension between legal teams – who want to mitigate risk – and commercial teams – who want to maximize revenue. Decision-making needs to be collaborative

Commercial strategy and legal risk will define the degree to which you’ll negotiate, and the terms you’re prepared to soften. Some of the most frequently negotiated terms are:

  • The commercials

  • Billing manner and frequency

  • The liability cap

  • The duration of the subscription

  • IP provisions

  • The mechanics of termination (“What happens to our data if we leave?”)

  • Related statements of work (SOWs) if the contract requires custom development

  • Indemnities

  • Data protection provisions (i.e. defining the data controller and processor)

  • Data hosting obligations

SaaS agreements can bring to the fore tension between legal teams – who want to mitigate risk – and commercial teams – who want to maximize revenue. Decisions need to be taken collaboratively, and will depend on the balance between the business’s growth targets and risk appetite.

Negotiating SaaS agreements is most likely unavoidable, so make sure your contract collaboration platform has features that will allow you to make the necessary exchanges quickly and easily

How to make SaaS agreement negotiation easier

Remind yourself of the purpose

Negotiations can sometimes be fraught (and frustrating) – particularly if salespeople have time-limited targets to hit – but remember that both parties ultimately set out with positive intent for the relationship. The purpose of a SaaS agreement is to do just that: agree. While negotiations might be necessary, they introduce friction; reducing that friction should be a key objective in the negotiating process.

Decide your fallbacks – and codify them

SaaS businesses often look to make negotiations easier – both in the deal, and between their legal and sales teams – by using playbooks to set out the fallback positions that legal are willing to accept. This can be used to empower sales teams to handle negotiations themselves, rather than needing to involve another team on a different schedule. If you use a contract collaboration tool to negotiate, you can codify these fallbacks using conditional logic. This will allow you to vary your contracts in the template, safe in the knowledge that you’re sticking to what’s already agreed.

 

Check out the ‘Modern contract handbook’, in which experts explore every stage of the contract lifecycle.

Find one system that does it all

In a manual process, SaaS agreements are created and managed across several different systems – typically Word, email and DocuSign – and shared back and forth across different channels. This is not only clunky, but can create serious risks, as changes (and the audit trails behind them) often don’t survive the transition from one system or version to another. An automated workflow, with legal defining the template and approving any changes, is far safer and much more efficient.

Useful features for negotiating SaaS agreements

Negotiating SaaS agreements is most likely unavoidable, so make sure your contract collaboration platform has features that will allow you to make the necessary exchanges quickly and easily. Look for the following:
  • Internal and external commenting, so that internal colleagues and external counterparties can see, make and track changes to the contract.

  • Visual timeline, so that you can see when counterparties have viewed the contract and address any hold-ups.

  • Audit history, so that you can easily compare different versions during negotiations.

  • Two-way CRM integration, so that any changes to the agreement are reflected in your systems of record for sales and contracts.

  • Integration with Slack and email, so that parties can be notified of negotiation as it happens.

  • Analytics, so that bottlenecks can be identified quickly.

  • Conditional logic, so you can easily swap out related clauses if key details change.

  • Word import/export: occasionally, asymmetry in the contract parties might mean one will refuse to negotiate in-browser and will make changes in Word. If your contract collaboration platform has a seamless import/export with Word, then changes and versions can be reconciled between the two platforms.

If your contract workflow is supercharged with all these features, both company and customer will find it easier to collaborate on SaaS agreement negotiations – hopefully leading to a faster signature and better outcomes for all involved.


Is negotiating SaaS agreements a pain point for your business? Is your SaaS company or marketplace growing so fast that the contract process is out of control, with friction pre-signature and a lack of visibility post-signature?

If so, collaborate with Juro and see if you could benefit from a contract collaboration platform that enables businesses to agree and manage contracts all in one unified workspace.

 

Topics: SaaS agreement

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