Looking for Sanity in SaaS Contracts (Part 1 of 5)

I’ve been doing a lot of negotiation around technology licensing, software development, software consulting, and other such agreements for some years. With the push for companies to embrace “cloud computing” and SaaS services, there has also been a proliferation of blog posts and articles written by so-called experts on the SaaS and cloud industries with a lot of strong cautionary language and telling executives and in-house counsel to be wary, seek maximum protection from your vendors, and negotiate without backing down.

I see a number of problems with this approach, and it’s gotten to the point where I felt the need to do a multi-part blog post about what I am seeing because I view the trends as disturbing. SaaS contract negotiations have become as hotly contested as enterprise software negotiations when they simply ought not be. So why have SaaS and cloud negotiations gotten uglier?

Risk-averse, Non-tech Savvy Attorneys

I think part of it is the fact that lawyers do not understand technology. Case in point: I was at a very large conference for in-house counsel last year and decided to attend the SaaS session. I was appalled at the obvious lack of knowledge and understanding of technology. Granted, I was an IT professional before I went to law school, but it scares me to hear “experts” opining on computer technology that they clearly do not understand… and then making recommendations to their fellow legal counsel based on misunderstandings. Another tech-savvy attorney I was sitting near was equally appalled. We ended up rolling our eyes a lot during that session.

Unfortunately, the natural response of people who understand something new is fear. I can assure you that the worst person to negotiate against is someone who has no idea what’s going on and is afraid of everything.

Confronting Chicken Little

Okay, so few attorneys understand technology. Most of them know that and seek advice instead of freak out—that’s good. The bad part is that the advice is often coming from people who don’t understand either.

The other part is that all of the articles, publications, and blog posts (often written by the “experts”) have been trying to educate and warn fellow in-house counsel about all of the traps around SaaS–and now cloud computing. And those publications often read like a playbook for how-can-I-kill-this-deal-with-lame-objections-because-this-contract-looks-slightly-one-sided-or-scary-to-me. The experts are fearmongerers. So I have to get this off my chest: stop there Chicken Little, you’re not helping anyone. SaaS has been around for nearly two decades, salesforce.com being one of the older recognized names, but there have been plenty. How long has hosted web serving been around? A long time.

The move to “cloud computing” is basically the public embracing SaaS and other off-site architectures (PaaS, IaaS are also terms thrown around), and while it’s the “hot” new thing, here’s some news for you: it’s not new. What people have been doing for years and years has only gotten increased visibility and the new “cloud” rebranding/marketing. Just keep your head in the right place, take a deep breath, and you’ll be fine.

Some actual details next time around.

Author: chinaesq

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