If you decide to use a local partner to resell your SaaS software to customers outside of the countries in which you are based, you will need to have a distribution/reseller agreement in place between yourself and each distributor/reseller.
What is a Reseller/Distributor?
A reseller is the same as a distributor. A reseller/distributor purchases the supplier’s SaaS software and services under the terms of a reseller/distribution agreement. The reseller/distributor then resells the SaaS software and services to its own local customers in the territory using its own terms and conditions (and SLA). The SaaS supplier has no legal relationship with the reseller/distributor’s customers. Customers enter into a SaaS agreement with the reseller/distributor directly.
Why use a Reseller/Distributor?
Most SaaS suppliers use distributors to enable them to sell their software and services to SaaS customers who would not otherwise purchase the SaaS software, due to the Supplier’s:
- Lack of physical presence in the SaaS customer’s country;
- Lack of sales channels and contacts in the SaaS customer’s country;
- Inability to speak the local language;
- Inability to provide SaaS customer support in the local language;
- Inability to provide customer support within the SaaS customer’s local business hours;
- Terms and conditions not being written in the SaaS customer’s language, or subject to local laws and regulations.
By using a distributor/reseller the above problems are resolved as the distributor/reseller sells the SaaS software directly to SaaS customers, in the local language, pursuant to local law, with local support as if the SaaS software was his own software.
The main advantage of using a reseller/distributor is that the SaaS supplier will have no liability to SaaS customers – as there is no contract or legal relationship between the SaaS customer and the SaaS supplier. For example, any implementation issues or software errors that the SaaS customer encounters when using the SaaS software will be the reseller’s problem. The reseller will be liable to the SaaS customer and will be obliged to resolve such issues directly with the SaaS customer.
The main disadvantage of using a reseller/distributor is that the SaaS supplier has no control over the sales process and in particular of the choice of SaaS customers. Also, the terms of the SaaS agreement itself will be subject to local anti-competitive laws and regulations.
Is an Agent the same as a Distributor?
Agents are often confused with distributors, but there are clear legal differences. An agent is a person or company who acts on behalf of the SaaS supplier to find leads and/or assist with sales of the supplier’s SaaS software to local SaaS customers in the agent’s territory.
An agent has no legal relationship with the SaaS customer as the agent has no contract with the SaaS customer. The SaaS supplier enters into a SaaS agreement, with the SaaS customer using the SaaS supplier’s own terms and conditions and SLA. The SaaS supplier is liable to the SaaS customers for issues and errors that may arise during use of the SaaS software.
Irene Bodle is an IT lawyer specialising in SaaS agreements and cloud computing with over 10 years experience in the IT sector. If you require assistance with any SaaS, ASP, software on demand contracts or any other IT legal issues contact me:
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