Service Agreements and Russian Dolls

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Traditionally, most businesses used software installed on their own systems that was documented by a software license.

It is becoming more common to use cloud based software or SAAS that is documented by a services agreement.

One difference is that there can be multiple layers. The services agreement may be subject to or intertwined with a software license, a cloud platform provider, and a reseller. Those can all be different parties with different terms. Each layer may impose the terms of underlying providers.

The business using the services can be stuck with the terms of the agreements and parties underneath their provider without the ability to negotiate the terms of the underlying agreements. The parties at the bottom or middle of the chain may require those above them to include certain terms. The party providing the services may be faced with pressure by its customer to alter those underlying terms.

No matter where one sits in that chain, they need to think about what is happening in practice, what each party is doing, how risk should be allocated, and what the expectations of each party should be. That will help sort out how it should be documented in a realistic way considering the business model, and in a way each party can live with.


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David Canton