SaaS Agreement vs Licence Agreement
Last updated: February 2025
Quick Comparison
| Aspect | SaaS Agreement | Licence Agreement |
|---|---|---|
| Delivery model | Cloud-hosted; accessed via browser or API | Installed on the licensee's own infrastructure |
| Pricing | Subscription (monthly/annual) | Perpetual licence fee or annual licence renewal |
| Maintenance | Provider handles all updates and maintenance | Licensee responsible (may have separate support agreement) |
| Data location | Stored on provider's servers | Stored on licensee's servers |
| Customisation | Limited to provider's configuration options | Greater scope for bespoke customisation |
What Is a SaaS Agreement?
A contract granting access to software hosted and maintained by the provider, delivered over the internet on a subscription basis.
Key Features
- • Software hosted by the provider in the cloud
- • Access via subscription; no ownership of the software
- • Provider responsible for maintenance, updates, and uptime
- • Typically includes SLAs for availability and support
Best For
- • Businesses wanting managed, always-updated software
- • Applications where internet access is reliable
- • Reducing IT infrastructure and maintenance costs
What Is a Licence Agreement?
A contract granting the right to install and use a copy of software, typically on the licensee's own infrastructure.
Key Features
- • Software installed on the licensee's systems
- • Perpetual or term licence for a one-off or recurring fee
- • Licensee responsible for hosting, maintenance, and updates
- • Greater control over the software environment
Best For
- • Organisations with strict data sovereignty requirements
- • Situations needing heavy customisation
- • Environments with unreliable internet connectivity
When to Use a SaaS Agreement
Use a SaaS agreement for standard business applications where you want hassle-free access, automatic updates, and predictable subscription costs. Ensure the agreement covers data ownership, portability, and exit provisions.
When to Use a Licence Agreement
Use a licence agreement when you need full control over the software environment, have strict data residency requirements, or require deep customisation that SaaS does not support.
Which Does Your Business Need?
SaaS is the default for most modern business software. Choose a traditional licence only if you have specific requirements around data sovereignty, customisation, or offline access. In either case, pay close attention to IP ownership, data rights, and what happens on termination.
FAQ
Who owns the data in a SaaS arrangement?
The customer typically owns their data. However, this must be explicitly stated in the SaaS agreement. Check for clauses about data portability, export formats, and what happens to your data on termination or provider insolvency.
What SLAs should I expect in a SaaS agreement?
Key SLAs include uptime guarantees (typically 99.5-99.99%), response times for support tickets, planned maintenance windows, data backup frequency, and disaster recovery commitments. Ensure service credits or termination rights are available if SLAs are not met.
Generate the right contract instantly
AccountsOS generates UK-compliant contracts tailored to your needs. From £10/month.
Get Started FreeThis is guidance for UK businesses, not legal advice. Consult a solicitor for complex matters.
View all comparisons