FEATURE STORY installed on Seller’s server,” you can take comfort in knowing that you are in fact not negotiating a software licensing deal. Still, you may wonder what to do in this situation – a service provider sends a document that looks like a software licensing deal, but you know this is not a software license. When I am faced with this situation, I will not try to red-line a SaaS agreement that feels like a license. The document is simply a throwaway, and I am quick to tell the other side the bad news. If I can, I will use this as an opportunity to send them my agreement, which has a tilt toward my client (he who drafts sets the agenda). Sometimes, and, admittedly, this is a bit of a cynical viewpoint; service providers will buy into this because of their hope that they can use my agreement as the starting point for the future redo of their form. 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. Not all service providers send SaaS agreements that read like licenses, and, over time, the number of providers who no longer do so has risen. A correctly written SaaS agreement is a service agreement without a license to use anything. Sometimes a SaaS solution requires special software and not just any browser to access the software being delivered as a service. In that case, there may be a license limited to that special software that can be installed on each PC that accesses the services. The generalization that SaaS is not a licensing arrangement remains true. As an example, think of the typical telephone service your company buys for landlines from companies like Verizon or AT&T. Your firm gets a dial tone that you instinctually know has lots of software behind it. Nevertheless, your organization does not license any software as part of that deal. All your company is buying is a service. To put it another way, what the telephone company does to provide the dial tone is its problem. With SaaS, it is the same thing. Your company does not license the software underlying the service. It simply buys a service that may happen to have software behind it to make the service work. Everything about your agreement with your service provider must reflect this reality underlying SaaS. Some Key Contract Considerations In all SaaS contracts, you will have negotiations regarding the usual provisions, like limitations of liability, exclusions from the limits, and indemnity. However, there are a few examples of considerations and provisions that are unique to SaaS deals. Service Level Agreements Perhaps the most important part of any SaaS deal is the negotiation of the service level agreement (SLA). Since your service provider runs and delivers the service to your company in a SaaS arrangement, it is essential that you have clear and objective provisions regarding variables like uptime requirements, speed, responsiveness, and the like. Typically, an SLA will provide for credits against the next month’s fees if your service provider does not meet the requirements of one of more of the specific service levels. Also typical are provisions that limit the total of all credits to between 10 and 20 percent of the fee in any given month. While it is tempting to write a long SLA with many specific metrics, I have found it more effective to focus on the metrics that are truly important to my clients. Otherwise, it is easy to get lost in minutiae. Moreover, and I cannot stress this enough, do not get lost in demanding service levels beyond what your company needs. Some downtime and occasionally deficient service are often reasonable risks depending on what the service does and the costs associated with problems. You may have heard such terms as “five nines” and “four nines uptime.” In plain language, this translates to 99.999 percent uptime, or the time a computer has been working and available, and 99.99 percent uptime, respectively. With a “five nines” uptime SLA, the service provider promises that the system will be down no more than about six seconds per week. With “four nines,” the promise is that downtime will not exceed about one minute per week. If the system uptime does not meet the standard required by the SLA, the contract would typically award a credit that would be applied to the next month’s bill. THE JOURNAL OF THE HEALTHCARE BILLING AND MANAGEMENT ASSOCIATION 15
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