Top 4 Strategies To Structure Your SaaS Reseller Agreement

You’ve successfully started up or converted to the SaaS model, and now you’d like to leverage your success by setting up a reseller channel for your SaaS offering. Or, you’d like to offer functionality using the SaaS model to your existing customers, and you’d like to start by offering a SaaS service provided by another service provider.

How do you go about structuring the transaction – including the SaaS Reseller agreement that will implement it?

There are at least 4 ways to do it, and these ways may be a significant factor in your business decision.

4 Strategies or Models

One of the most fundamental decisions is: on whose server will the software reside – the server of the Licensor (software vendor) or the Reseller (seller to the end-users of the SaaS service)?

These are the 4 basic strategies or models:

  • linking-framing – software resides on the Licensor’s server;
  • virtual server – software resides on the Licensor’s server;
  • virtual desktop – software resides on the Licensor’s server; and
  • software on Reseller’s server.

Linking-Framing

With the linking-framing approach, the Licensor grants to the Reseller rights to market and distribute Licensor’s SaaS services originating from Licensor’s server through a link from Licensee’s website that “frames” Web Services on Licensor’s server.

This approach utilizes framing technology to create a link between the linked pages of the Licensor’s website and the linking pages of the Reseller’s website.

This approach may be adapted for both co-branding and “private label” branding of the SaaS service.

Virtual Server

With the virtual server approach, the Licensor grants to the Reseller rights to market and distribute Licensor’s SaaS services originating from Licensor’s virtual server through a single domain name to be provided by Licensee.

Licensee’s end-users access Licensor’s virtual server through Licensee’s domain name using a regular Internet browser. The virtual server is partitioned for use by Licensee.

This approach may be adapted for both co-branding and “private label” branding of the SaaS service.

Virtual Desktop

With the virtual desktop approach, the Licensor grants to the Reseller rights to market and distribute Licensor’s SaaS services originating from Licensor’s server through a sub domain to be provided by Licensor.

Licensee’s end-users access Licensor’s server through Licensor’s sub domain name using Licensor’s proprietary client software. Licensor’s server is partitioned for use by Licensee.

The virtual desktop approach is particularly well-adapted for use with standard desktop applications as distinguished from native web-based applications.

Software on Reseller’s Server

With the software on Reseller’s server approach, the Licensor grants to the Reseller rights to load Licensor’s designated software product in object code form on Licensee’s server and to distribute SaaS services generated by the software product from Licensee’s website.

Key Issues

Key issues with any SaaS reseller agreement include:

  • privacy and data security,
  • website operations, and
  • the new Federal Trade Commission (FTC ) Regs that go into effect on December 1, 2009.

Since the linking-framing, virtual server, and virtual desktop approaches involve processing and archiving data on the Licensor’s server, presumably including personally identifiable information (information that may be used to identify a person), standards for data security and liability for data security breach are among the primary concerns of Resellers. In addition, Resellers are keenly interested in assurances from the Licensor that Licensor’s server will provide the requisite uptime guarantees, and these assurances usually are in the form of a Service Level Agreement (SLA) that is made a part of the reseller agreement.

With each of the four approaches, under the new FTC Regs, the Licensor is required to:

  • provide guidance and training to resellers regarding advertising statements, and
  • monitor resellers and remedy unlawful advertising statements.

Conclusion

SaaS reseller arrangements offer promising opportunities both to Licensors and Resellers. The key to a good relationship often starts with the contracting approach that best fits the requirements of both parties.

Copyright © 2009 Chip Cooper

For additional information, visit our SaaS Legal Resource.

This article is provided for educational and informative purposes only. This information does not constitute legal advice, and should not be construed as such.

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