The Ins and Outs of SaaS Platforms
SaaS Platforms: Part 1
Software-as-a-service (SaaS) business models are in high demand in our ever-growing e-commerce economy for good reason. Not only do they produce scalable recurring revenue for the provider, they also offer easy-to-use, flexible functionality for users. And with so many people working remotely due to COVID-19, demand for SaaS functionality has only increased.
But providers of these platforms must understand the business and legal requirements and associated price tags that come with data usage and storage, security, and privacy compliance in all 50 states and around the world. They must be prepared to prevent and mitigate service disruptions and know how to best contract with users. Their platform must protect their own and their clients’ software and other intellectual property. And, if planning an eventual exit, SaaS providers should ensure they are thinking about how future investors will view (and value) their efforts.
There are many decisions a SaaS business owner needs to thoughtfully consider. Following is part one of Fortis Law Partners’ three-part guide to understanding the benefits, requirements and risks of providing a SaaS platform and how to avoid costly mistakes. For more information or to obtain expert counsel on any of the topics covered, contact Christine Amrhein.
What is a SaaS Platform?
A SaaS service provider allows multiple customers shared access to software applications via remotely located (cloud) servers and/or platforms either owned or provided by the service provider on which customers can perform tasks. The SaaS provider may also store or manage data for users.
Typical examples include office, email and messaging applications, customer relationship management, report compilation and data management.
SaaS is different from traditional software licensing where the licensor provides one or more copies of the software (usually object code) to the customer who is then responsible for on-site operation of the software, acquiring and maintaining required hardware, and managing the functions and data. With SaaS, the provider has the expertise and bears the expense and responsibility for providing and maintaining the platform, software and functionality. The customer can access all the features and functionality using standard office equipment and internet connections.
What are the Benefits of Using a SaaS Platform?
There are many benefits to businesses that opt for the convenience of using web-based, on-demand software-as-a-service, including:
- Little or no installation or capital requirements, resulting in overall lower costs
- Better collection, storage and processing of large quantities and varieties of data
- Greater elasticity, allowing a business to rapidly expand and contract its use of the service without incurring additional IT resource or hardware upgrade costs
- SaaS processing and backup facilities minimize the risk of catastrophic failure or destruction of data
How Can a SaaS Provider Mitigate Risks?
The responsibility of keeping large quantities of data and personally identifiable information secure and private is huge. Data breaches or unauthorized illegal system intrusions resulting from malicious or criminal activity, hacking, data theft, espionage (by competitors, insiders, or criminals), user error, or negligence by employees or contractors are a constant risk.
In our next post, we’ll cover how to address the top five SaaS data security and privacy compliance risks.