In the face of the novel Coronavirus outbreak, Software-as-a-Service companies are expected to be resilient as a result of their business model. Meanwhile, many SaaS customer are planning how to help minimize the short term spend, yet position themselves for a strong rebound. The challenge we must all face is how can we balance those interests and prosper together.

The outbreak of the COVID-19 pandemic virus and its economic implications are the first significant test for a majority of companies since a great majority of SaaS businesses began – or gained a significant scale – in the aftermath of the 2008 financial crisis. Promises of financial flexibility that are offered through operating business models for SaaS now raise interesting questions; SaaS providers have sunk long term SaaS infrastructure investments based upon the client’s long-term SaaS commitments; yet clients in an effort to respond to this catastrophic event will begin to evaluate personal financial situations and where they will need to potentially minimize expenditures, which can include software expenditures.

Understand Future Customer Needs with Regard to Saas

As the spread of COVID-19 has become more evident, with 1 in 7 US workers on unemployment and many industry segments completely on hold, businesses have hurried to respond, SaaS providers have been asked to consider a wide array of client requests for potential short-term relief.

As the pandemic began to spread, client requests primarily focused on the flexibility of payment terms, whether they were term extensions or were moved to infrequent billing. Many SaaS provider have now also begun to consider pausing account suspensions or possibility offering customer short term credit extensions. Moreover, many companies are using this time to offer or extend free trials. Or deferred buy now, pay later options all in order to generate a immediate demand all the while offering support for their respective communities.

As a result of uncertain times and the unknown timetable for reopening the world’s economy, it is important that SaaS companies consider taking a proactive stance in understanding potential consequences and to establish strategies for an effective response. Most SaaS Agreements are structured as pre-paid, non-refundable licenses generally these are payable annual in advance. During most times that SaaS cloud-based service model works quite well, customers don’t need no invest in platform infrastructure in advance, dedicated administrative staff to support that host platform and the application; they just establish an instance on the SaaS provider’s host and they are ready to proceed in a fraction of the time. SaaS vendors generally offer their product in a manner that allows it to seamlessly scale upwards to meet additional consumption requirements seamlessly; however, with many businesses in the midst of an operational pause or at least a substantially reduced processing model, can that attractive SaaS model work in reverse? While the SaaS model does offer improved flexibility the platform investment, the hosting center expense and the SaaS provider’s staffing are all based upon long-term financial commitments and they don’t contract as neatly as the scale upwards. The SaaS model is obviously (and thankfully) very well suited to support a world of remote telecommuting, that allows your business to keep running even if the office itself is closed. As you sit at home streaming on Netflix, Hulu or on Zoom meetings, image a world where that was not the case.

Understanding What a Systematic Response May Look Like For Your Company

It is critical that companies assess their internal financial situation before they can address client requests. If SaaS customers  require an ability contract as well as to scale up,  if your SaaS provider does offers that option it will generally be at a significant premium price and may be subject to various operational constraints notice, a minimum volume etc. Companies should understand that any action taken, whether it is an extension in payment terms or the suspension of service, has serious consequences that will need to be thoroughly reviewed by your SaaS provider. Having an in-depth understanding of these details will influence the degree to which the SaaS provider will be able to accommodate customer’s requests.

As companies move beyond the immediate impact of the virus, company leaders can move toward capitalizing on investments made during this challenging period. A SaaS based model that is carefully structured to support your unique corporate requirements can be a very useful resource as your business continues to respond to new, and often unexpected set of challenges.

Speak to a SaaS Attorney

As the novel Coronavirus pandemic tests the resiliency of companies’ customer bases, as well as the adequacy of their operational preparations SaaS companies should consider making proactive assessments, adjust to minimize customer churn, and also manage the near-term impacts to their top-line. In order to achieve this, SaaS providerd will need a systematic effort to reach out to their customer-base and across their internal team – along the mutual understanding that, when navigated appropriately, these current challenges will provide the opportunity for both parties to build and grow together. Speak to a well-versed SaaS attorney about how you can protect and reinforce your business during this pandemic. Where there is change there is opportunity, you just need to be able to spot it and adjust accordingly.

Technology Attorney John P. O’Brien is highly experienced in the field of SaaS Agreements. Attorney O’Brien understands that this is a very sensitive and challenging time for a majority of SaaS companies. In order to better understand how to navigate the uncertain time, speak to a well-versed attorney who can guide you.