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More and more businesses are moving to the SaaS model to manage their systems and data.

SaaS, Software as a Service, has several advantages for both the customer and the supplier.

In the SaaS model, the customer’s data, systems and software necessary to handle it are located in the Cloud.  That is, hosted on servers which belong to or are used by the supplier rather than those of the customer.

One of the principal advantages of this is that the customer is no longer required to acquire expensive hardware, resulting in lower infrastructure costing, more rapid set-up and installation of the systems.  This also removes from the customer the necessity of constantly updating and improving the software, which is the responsibility of the supplier.

The customer is always assured of remaining on the latest version of any software and its enhancements or upgrades and of having the supplier take care of the hosting (usually) and security of the information.

Financially, the customer avoids a heavy upfront cash outlay for infrastructure and has a more regular expense cycle.

In addition, depending upon the length of the contract, if the customer is unsatisfied with the service, it would have the option at the termination of any term to migrate to either its own system of another SaaS provider.

From the point of view of the supplier, it has the advantage of being able to constantly keep its systems upgraded without having to constantly upgrade the software or infrastructure of each of its customers.

Furthermore, the supplier does not have to deal with legacy systems which may be outdated and customers who are not willing to upgrade to the latest version of the software.

From a financial point of view, the supplier has a steady revenue stream based upon monthly or annual access fees, which can be tailored to the number of customers or other metrics which may be specific to each type of customer.

Customers generally benefit from increased reliability since many suppliers provide guarantees of 99% and more uptime of their systems, which often exceeds that which customers could obtain from their own systems.

The SaaS system is a fast growing mode and as of today approximately 25% of the banking and health care sectors have already migrated to the Cloud and it is anticipated that this figure will keep increasing.

Gartner Inc., the software research company, states that it expects traditional on-premises software deployments to shrink to just 18% by 2017 compared to 34% in 2015.

While this model may not yet be the proper solution for every business, especially those who have just invested in major infrastructure upgrades, it is a solution which should be seriously examined.

Please feel free to communicate with the undersigned to explore this issue further and to help you navigate through the various aspects of the transaction.

Frank M. Schlesinger is a partner at Spiegel Sohmer with extensive experience in the field of computer law, including software licensing, hardware, sales licensing and maintenance, intellectual property and trade-marks.