SaaS Agreements: Authorized Users and Storage Capacity

By Drew Stevens - August 16, 2018 - Technology & IP

Whether you’re rolling out your software as a service (SaaS) or tweaking an existing SaaS agreement, there are a number of areas that warrant further consideration. Two issues, which initially may seem straightforward enough, are authorized users and storage space.

Authorized Users Provisions

A key area to contemplate is how authorized users are defined. If you’re the customer, you obviously want the SaaS agreement to define the authorized user as your entity or business as a whole. This enables all of your employees to use the SaaS.

Depending on your business model, if you’re the SaaS provider, there are a number of different routes you can go with authorized users. If you’ve factored it into your pricing, one of the easiest routes is the seller’s preferred route – just granting the customer’s entire business the right to use your product.

However, there are a number of ways to define or limit authorized users. Popular options include geography, blocks of users, and minimum commitment. With geography, the authorized users are limited by a specific territory or territories. With blocks of users, the SaaS provider may stipulate different pricing tiers based on the number of users. For example, there may be a monthly service charge for the base services, and then extra charges for additional users 15-50, further charges for additional users 50-100, and so on. Minimum commitment pricing may charge per user, but require at least a specific number of users to start.

Storage Space Provisions

An issue that can go hand-in-hand, but one that can often be overlooked, is storage capacity. If your SaaS incorporates storage space as a significant component or feature, this can have an impact on your pricing and cost. A good exhibit to your SaaS agreement may reference specific limits on a monthly, annual, or fixed basis.

To avoid possible issues between the parties, if you’re the service provider, you may want to incorporate a provision that stipulates that you’ll notify the customer when they get close to their storage limit. You may further want to specify tiered pricing for every increment that the customer exceeds their capacity within the specified time frame. Lastly, it may be worth considering procedural mechanisms for increasing storage capacity.