What Is a SaaS License Agreement

In the history of Middle Earth, the elves crafted 19 Rings of Power. When Sauron made his bid for power over the realm, he didn’t bother with tracking down the individual humans, dwarves, and elves who held them. That would’ve been far too time consuming—and costly. Instead, he crafted the One Ring to rule them all from a central location. SaaS management isn’t so different. 

In fact, Statista reports that the average business manages 130 SaaS (software as a service) applications. That’s a lot to keep track of, and failing to manage these applications effectively can result in the following negative consequences:

• Costly Inefficiencies: Having an unwieldy amount of SaaS programs makes it much harder to connect them. How can you have your marketing data integrate with your CRM if you have that data scattered across multiple platforms without a clear idea of where anything is? In the time your team members spend hunting down information, they could be closing deals instead. 
• Employee Frustrations: Modern knowledge workers have two jobs: their actual job and navigating the plethora of software applications required to perform that job. When your team members are spending more energy on figuring out how to get different platforms to “talk” to each other than creative problem solving, your business misses out on impactful ideas. A towering tech stack can also overwhelm new hires and burnout employees.  
• Hidden Subscription Fees: New and exciting SaaS platforms are constantly bursting onto the scene. However, it’s easy to get caught up in the excitement and forget that when you sign up for a new program, you might be able to stop using an old program. Forbes reports that businesses waste an average of 10% of their IT budget on unnecessary software. 

With only 19 rings to manage, Sauron had it easy! In this blog, we break down the basics of revolutionizing your approach to SaaS license management, including how to forge your own One Ring to rule them all with Lumos!   

What Is a SaaS License?

Software as a Service (SaaS) licenses provide users with access to a software platform in exchange for a monthly or annual fee. A common SaaS license example in the home is Netflix (or any other of the multitude of streaming services). You pay Netflix a monthly or yearly subscription fee to access all of the content on their platform. This model also includes new content when it’s released and ongoing support. 

How does SaaS licensing work for businesses? The SaaS model is very similar for business software as it is for consumer services like Netflix. The business benefits because they spread out their costs over months or years instead of needing to invest a substantial amount upfront. The SaaS provider benefits from a consistent stream of revenue rather than cyclical bursts.

SaaS licensing models include: 

• Subscription-Based Licensing: This structure is one of the most common models for SaaS licenses. Customers pay a recurring monthly or annual fee for access to the software.
• Freemium Licensing: Users can access the basic features of the software at no cost, but must pay to use additional premium features.
• Pay-Per-Feature Licensing: This model lets users purchase specific features or modules a la carte rather than providing a base set of features. 
• User-Based Licensing: Businesses must purchase individual licenses for each user that will access the software. 
• Concurrent/Floating User Licensing: Rather than paying for each individual user, businesses will pay for a set number of users that can access the software at one time.

What Is a SaaS License Agreement?

A SaaS license agreement is the contract between the user and the SaaS license provider. So exactly what should be in a SaaS agreement? Everything that you’d expect to find in the fine print, from subscription costs to additional fees and service obligations. When negotiating with service providers, you’ll encounter the following types of SaaS contracts:

• Service Agreement
• Service Level Agreement
• Subscription Agreement
• Licensing Agreement
• End User License Agreement
• Terms & Conditions
• Reseller/Distributor Agreement
• Channel Partner Agreement
• Referral Agreement

These contract types aren’t mutually exclusive. SaaS providers may combine several types of agreements into a single contract. For example, your agreement may contain both the terms of the subscription and the details of a referral program.

Is your team overwhelmed by the amount of SaaS contracts you have to track? You might be leaving money on the table. 

How Do You Manage SaaS Contracts?

The most effective method for SaaS contract management is to have a central point of control. For example, Lumos makes SaaS license management a breeze by giving you visibility into all of your apps—all in a single platform. This gives you an overview of two key data points: how much you’re spending on each SaaS subscription and how much your team is actually using each platform. With clear data on your side, you can cut costs by canceling unused services and enable your team to succeed by investing more in what they use most.  

To learn how your business can improve software license cost tracking, book a demo.

Take Control of Your SaaS Setup with Lumos

Retaining a backlog of underutilized SaaS applications isn’t just confusing, it’s also bad for business. With Lumos, you can cut loose programs that no longer benefit you—and rid yourself of extra hidden costs that are dragging you down. Here’s how Lumos makes SaaS management simple:

• Visibility into SaaS application costs
• Insight into SaaS application usage data
• Overview of access points and security concerns

It’s time for a change. Contact us today to learn how your business can trim unnecessary SaaS costs.