This is obviously easier said, than done. According to our informal research, close to
50% of all ISV’s fail at least once before successfully rolling out a successful SaaS strategy. What is interesting is that 35% of all ISV’s are currently in the process of trying to move to SaaS according to
Saugatuck Technologies. Because it is difficult, I am going to share my 12 best tips when transitioning to a SaaS business model over the next few Smart SaaS posts.
Tip #1: What Is Your SaaS End Game?
This sounds basic but it is amazing how many clients don’t really know how far they plan to go with SaaS. Will your company go all the way and convert 100% of your business to multi-tenant subscription solutions over time or will you continue to offer on premise software as well. This diagram is helpful with speaking with your team to determine where your company fits along our
Software Continuum.
Depending on your strategy – traditional, hybrid, cross-over or SaaS, this should change your game plan. Keep in mind that a complete SaaS transition can take anywhere from 3-5 years to complete, so break your plan into 12 month phases. For a company just looking to launch a hybrid model, offering both deployment options, the timing for transition will be less than a company looking to do a
full move to SaaS.
A new SaaS start-up takes about 5 years to break even and most venture capitalists are looking at 7 years before the company could possibly go public. On average most successful SaaS firms take about $35M in investment before they can reach an IPO stage, so you should be prepared to invest in your SaaS transition as you shift from a perpetual model to a subscription model.
Stay tuned for Tip #2: Separate Your Hunters from Farmers.
Part of a successful strategy is a suitable SaaS agreement.
The following legal issues should be included in any SaaS agreement, whether you are a supplier or a customer.
Software Licence
Access to the software should be limited to the term of the ASP agreement. Once the agreement expires or terminates the software licence should automatically terminate.
If the customer is a global entity, specify which companies or entities may access the software, in which territories and the number of users. Identify the specific purposes for which the software may be accessed. Name any third parties who will be permitted access to the software i.e. outsourcing providers or clients of the customer.
Intellectual Property Rights – IPR
The supplier should retain ownership of all IPR in the software and services it provides. The customer should retain ownership of all IPR in its systems and data. Specifically state that the source code remains owned by the supplier. The customer should grant the supplier the right to use its IPRs for the term of the agreement i.e. display its logos and copyrighted information.
Escrow
Specify who the owner of the source code is, as it may not be the supplier i.e. the holding company of the supplier. State whether or not the customer can enter into an agreement with a third party to hold the source code in escrow. Include the name of the escrow agent and who will be responsible for the costs of the escrow agreement and any annual renewals.
Applicable Law, Jurisdiction & Language
State which law applies to the SaaS agreement any disputes arising from its. In international ASP agreements specify which language the dispute will be dealt with and if the agreement is in more than one language, which language prevails if there is a discrepancy between the two versions.
Return of Data
At the end of the agreement the customer’s data should be returned. The format in which the data is to be returned and payment for this service should be agreed in advance. Additionally the parties can agree that the supplier will provided assistance in transferring customer data to a new supplier – in return for payment for this service.
Data Protection
The supplier is the data processor and the customer is the data controller. Under UK data protection law different rules apply to the data controller and the data processor. The supplier is obliged to process data in accordance with the customer’s instructions and should protect itself against claims from third parties that such processing was illegal. Likewise, the customer will also need to protect itself against claims from third parties caused by the supplier not processing data in accordance with its instructions or the agreement.
Service Level Agreement (SLA)
This sets out the hosting, support and maintenance services being provided to the customer by the supplier. The SLA should specify where the data centre is located, who is operating it, what security, backup and disaster recovery procedures are in place. Support hours and support services for dealing with hosting problems and software problems should be identified and documented and the procedure for dealing with with upgrades and maintenance to the software should be identified. The particular details will depend on the amount being paid for the hosting, support and maintenance and the purpose for which the software is being used.
Help
For assistance with SaaS, ASP, software on demand contracts, SLAs or any other IT legal issues contact me at:
irene.bodle@bodlelaw.com
http://www.bodlelaw.com
Other related articles at http://www.bodlelaw.com:
* SLAs Explained – Essential Elements
* SaaS, ASP Agreements – FAQs – Disaster Recovery
* SaaS, ASP Agreements – FAQs – Security
* SaaS, ASP Agreements – FAQs – Confidential Info
* SaaS, ASP Agreements – FAQs – Software Licence
* SaaS, ASP Agreements – FAQs – Source Code
* SaaS, ASP Agreements – FAQs – Escrow
* SaaS, ASP Agreements – FAQs – Data Protection
Hi Irene,
I agree that many firms who transition need to re-think how they are handling their legal agreements.
Thanks for your helpful comment!
Kevin
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