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Software as a Service (SaaS) agreements and software license agreements are both legal contracts that govern the use of software, but they have distinct differences in terms of their scope, terms, and how software is provided to users. Here are the main differences between these two types of agreements:

1. Delivery Model:

SaaS Agreement: In a SaaS agreement, the software is not installed on the user’s local device or server. Instead, it is hosted and operated by the provider on their servers, and users access it over the internet. Users typically pay a subscription fee for ongoing access to the software.

Software License Agreement: A software license agreement allows users to install and use the software on their own local devices or servers. Users typically purchase a license for the software, which grants them the right to use it under certain terms and conditions.

2. Ownership:

SaaS Agreement: The provider retains ownership of the software and the infrastructure hosting it. Users generally have a right to use the software while their subscription is active, but they do not own the software itself.

Software License Agreement: In a license agreement, the user typically obtains a copy of the software and may own a perpetual or limited license to use it, subject to the terms of the agreement. Ownership of the software usually remains with the software developer or vendor.

3. Updates and Maintenance:

SaaS Agreement: The provider is responsible for maintaining and updating the software. Users typically receive automatic updates and improvements as part of their subscription, with little to no involvement in the update process.

Software License Agreement: Users are responsible for installing updates and patches themselves, unless a separate maintenance agreement is in place. They have more control over when and how updates are applied.

4. Access vs. Installation:

SaaS Agreement: Users access the software through a web browser or dedicated application, typically from anywhere with internet connectivity. No installation or local storage of the software is required.

Software License Agreement: Users need to install the software on their own devices or servers. The software operates locally, and usage may be subject to hardware and system requirements.

5. Subscription vs. One-Time Payment:

SaaS Agreement: Users pay a recurring subscription fee to access the SaaS platform. The fees are often based on usage, the number of users, or other factors.

Software License Agreement: Users typically pay a one-time or upfront fee for the software license, although some licenses may include ongoing maintenance and support fees.

6. Termination:

SaaS Agreement: Termination of a SaaS agreement usually results in the user losing access to the software and data hosted by the provider.

Software License Agreement: Termination may result in the user losing the right to use the software, but they retain the installed copy of the software unless the agreement specifies otherwise. The user does not receive any further software updates.

7. Data Handling:

SaaS Agreement: SaaS providers may handle user data on their servers, and the agreement should specify data handling, privacy, and security terms.

Software License Agreement: Data handling and security are typically the responsibility of the user, as the software is installed on their own infrastructure.

8. Scalability:

SaaS Agreement: SaaS solutions are often more scalable, allowing users to easily adjust (up or down) the number of licenses or resources as needed.

Software License Agreement: Scaling with licensed software may require additional licenses and installations, which can be more cumbersome.


It’s important for both software providers and users to carefully consider their specific needs and objectives when choosing between a SaaS agreement and a software license agreement. The choice will depend on factors such as software deployment preferences, budget considerations, control requirements, and scalability needs. Additionally, legal counsel should be consulted to draft or review these agreements to ensure compliance with applicable laws and to protect the interests of both parties.

If you’d like to review or discuss your SaaS agreement and a software license agreements, schedule a no-obligation, complimentary 30-minute consultation with us.

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Kelly Logan


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