What is a reduction clause?
A reduction clause refers to a provision in a software agreement that allows customers to reduce the number of licenses or users covered by their subscription during the term of an agreement. This provides customers with flexibility to adjust their plan to meet evolving business needs, while avoiding paying for licenses or users they no longer require or needing to terminate the contract. The specific terms and requirements of a reduction clause may vary depending on the SaaS provider and the subscription agreement, for example it may be subject to a minimum number of licenses or users.
Related Definitions
Master Service Agreement (MSA)
What is a Master Service Agreement?
A Master Service Agreement (MSA) is a contract between two parties, in this case the software provider and the buyer, outlining the terms and conditions of the agreement. It will typically cover pricing, payment terms, service levels, intellectual property rights, confidentiality, liability, termination, and dispute resolution.
Unlike a service level agreement (SLA) which outlines the specific performance metrics and criteria for the delivery of a particular service, for example uptime guarantees and support response times, an MSA covers the broader terms of the business relationship.
Service Level Agreement (SLA)
What is a service level agreement in SaaS?
A Service Level Agreement (SLA) is a subset of a Master Service Agreement (MSA) and contains specific details about the level of service that will be provided by the SaaS vendor. This agreement will specifically define the performance metrics, responsibilities, and expectations of both parties.
An SLA is likely to include uptime guarantees, the level of support that will be provided to the customer, response times for any support requests, information on how these requests will be managed and escalated, information on how the vendor will protect the customer’s data and ensure the security of its systems and networks, as well as details on how it will compensate the customer if it fails to meet the agreed-upon service levels.
Outsourced Procurement
What is meant by outsourced SaaS procurement?
Outsourced procurement in SaaS refers to the process of hiring a third-party vendor to manage some or all aspects of a company’s procurement process. This can involve negotiating with vendors on your behalf to secure the best possible price and terms on any SaaS contract, while also refining, implementing and enforcing procurement processes that ultimately protect your business.
Multi-Tenancy Environment
What is a multi-tenancy environment?
In cloud computing, a multi-tenancy environment refers to a situation where multiple users, also referred to as tenants, share the same physical infrastructure and resources. These resources, such as computing power, memory and storage are dynamically allocated based on the needs of each tenant. Each tenant’s data is, however, stored in separate databases to ensure both privacy and security.
Price Uplifts
What are price uplifts?
In the context of SaaS, price uplifts refer to an increase in the price of a software subscription. While many software providers will implement price uplifts on an annual basis, typically at the point of renewal, others may review and amend their pricing more frequently, for example on a quarterly basis. It is recommended that buyers negotiate a price uplift cap during the initial contract negotiation stage, placing a limit on the maximum amount the subscription can be increased by within a specified time period.
Auto-Renewal
What is an auto-renewal clause?
Auto-renewal is a term often used in SaaS agreements referring to the automatic renewal of a user’s subscription plan at the end of their contract term. These auto-renewal clauses will automatically extend the user’s subscription for another period, typically the same duration as the initial term, unless the customer explicitly cancels or modifies their subscription by a specified date. This is often referred to as a termination window and is typically either 30, 60 or 90 days prior to the renewal date.