Strategies for Negotiating Cloud Software Deals THEY ARE NOT THE SAME AS SOFTWARE LICENSING DEALS By Mark Grossman, Esq. ealthcare billing and management companies are increasingly turning to data storage “in the cloud” or software as a service (SaaS) tools. Both options represent significant changes from more traditional models, where data is stored locally and companies license the software they use. If you are utilizing or have considered using SaaS storage tools, it is important to understand how SaaS contracts and deals differ from traditional software licenses. First, the Basics For many people, navigating the seemingly complex terminology of tech tools can be a daunting task. However, by learning the basics of cloud storage, you will hopefully see that this area of technology is neither mysterious nor complex. So, what is cloud computing and where is the cloud? For our purposes, cloud computing is simply the delivery of computing and storage services over the Internet. If you have ever stored your music collection on iTunes or your photos on Flickr, you have used the cloud. The cloud physically lives in data centers around the world. Amazon is a well-known example of a cloud services provider, since it sells access and use of its data centers to other companies for their business needs. So, to visualize the cloud, do not look to the sky! Instead, you should think of a less appealing sight – racks of computers gorging on a power grid in a cool room with lots of ventilation so they do not fry. That is the cloud. SaaS is the delivery of software from the cloud to your computer. If you use Gmail or Yahoo mail, you have used a SaaS solution. Gmail is run by complex email software, but you do not have the software installed on your computer. Rather, you access this 14 HBMA BILLING • JULY.AUGUST.2014 complex software using your browser. Compare this to the traditional software licensing model, which installs complex email software, such as Outlook, on your PC’s hard drive. Negotiating Agreements Your company’s ability to negotiate an agreement for SaaS and cloud computing services is no different from its ability to contract any other type of tech agreement. While service providers may argue that they cannot agree to custom agreements with individual customers because of the shared infrastructure inherent in cloud and SaaS solutions, in my experience, this simply is not true. The reality is that your company’s ability to negotiate the poorly written form agreements that service providers often impose upon you as non-negotiable PDFs is directly proportional to factors such as the size of your spend, the length of the agreement, and your company’s size. If this sounds similar to your negotiating power in almost any other type of deal, that is because it is no different. SaaS is Not a License The starting point in negotiating any SaaS deal is for you to understand that SaaS is not a software licensing deal. Indeed, it is a complete paradigm shift from licensing software to providing it as a service. Thus, if the service provider sends you a form agreement with licensing language like “Buyer hereby licenses the software H
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