Practical contracting advice for growing tech companies
Landing a large customer should feel like a win. Then their procurement team emails a 40-page “Professional Services Agreement” and says: “We don’t sign vendor contracts. You’ll need to use our PSA.”
There’s just one problem: the deal doesn’t fit a professional services model. It’s a:
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- SaaS subscription
- software license
- hardware sale with limited services
- usage-based API product
In other words, it’s the wrong contract for the deal.
The following provides a practical framework for evaluating the issues presented by this situation while supporting continued deal progress.
1. Reframe the Conversation (before it becomes a power struggle)
The fastest way to lose momentum is to argue “our paper vs. your paper.” Instead, companies often shift the discussion toward fit, clarity, and expected outcomes, which may help keep the discussion commercial and collaborative—not territorial.
For example:
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Misalignment
“Your template is clearly designed for professional services and consulting. Our product is a standardized SaaS platform. Forcing SaaS into a PSA tends to create gaps and confusion for both sides.”
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Clarity
“We want both teams to be aligned on what’s being delivered, what’s supported, and how risk is allocated. Using a mismatched template usually creates ambiguity that neither side wants.”
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Outcomes
“The fastest way to get you live, supported, and successful is to use a contract structure that actually matches the product.”
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2. Understand the Risks Hiding in the “Wrong” Template
When customers insist on a services-style MSA or PSA for a product deal, the risks are rarely theoretical; they’re baked into the language.
Here are a few examples:
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Bespoke deliverables/work product vs. access and reporting
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A standard PSA often assumes:
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- custom deliverables
- milestones and acceptance testing
- re-performance obligations
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Yet, in a SaaS deal, these assumptions are at risk of quietly turning into:
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- implied customization obligations or inadvertent transfers of core IP
- open-ended acceptance periods
- rejection rights that don’t belong in a subscription model
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IP ownership and “work made for hire”
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Many services templates will include this provision: “All work product and intellectual property created under this Agreement is owned by Customer.” For a product company, that’s not aggressive – it’s existential.
In terms of IP-related risk, the wrong template can:
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- assign ownership of platform enhancements to the customer
- contaminate your core IP
- raise red flags for investors, acquirers, and future customers
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Warranties that don’t fit the product
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PSAs frequently include:
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- broad “compliance with all laws” warranties (with no scope limits)
- performance promises that don’t align with SaaS uptime models
- quasi-fitness-for-purpose obligations
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AI-specific misalignments
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PSAs often include AI-related restrictions, such as:
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- blanket prohibitions on any use of AI in delivering or supporting the service
- requirements to disclose or obtain approval for all models, training data, and prompts
- customer ownership of all AI inputs, outputs, or improvements
- obligations to route all AI processing through customer-managed environments or dedicated instances
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In a SaaS deal, such provisions may be:
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- overly broad (e.g., prohibitions on AI use include low-risk internal tooling, such as code analysis, log review, or ticket triage)
- burdensome (e.g., disclosures at a level of detail that is operationally unrealistic or exposes confidential IP)
- not applicable (e.g., processing expectations on a standardized, multi-tenant product)
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Indemnities and liability that don’t align with the deal economics
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Provisions that may create imbalanced risk allocation and liability obligations:
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- indemnities for any claim “arising out of” your services
- professional negligence concepts applied to software
- security or data breach indemnities untethered from control
- liability caps tied to a single SOW
- silence on recurring fees
- caps that are effectively meaningless
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In a typical SaaS deal, it is more common to find:
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- a cap tied to a defined fee period (often 12 months)
- limited, insurable carve-outs
- and no “uncapped everything” surprises
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3. Don’t just say “no”
Customers are far more receptive when you bring solutions, not objections. Consider preparing structured options in advance to avoid last-minute compromises under deadline pressure.
Option 1: Your MSA + their PO
Position it simply: “We use our SaaS MSA for all customers to keep our security, operations, and support consistent. We’re happy to use your PO or order form for commercial details.”
Option 2: Their MSA + your SaaS addendum
This is often the sweet spot.
Agree to use their MSA, with your SaaS terms attached:
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- SaaS or software terms
- data protection and security addendum
- service levels and support policies + a clear precedence clause to help resolve potential conflicts (e.g., “In the event of a conflict, this SaaS Addendum controls with respect to the SaaS services.”)
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Option 3: A short override rider
If they refuse to abandon their template, another option may be a focused 3–5 page rider that:
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- clarifies the deal is a standardized product
- neutralizes misfit provisions (IP assignment, acceptance testing, work-for-hire)
- inserts your core protections (IP ownership, license scope, SLAs, liability caps)
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4. Non-negotiables worth protecting (even on “their paper”)
Certain contract terms deserve greater focus—even on the customer’s paper. Consider establishing internal positions and having language drafted in advance. Common non-negotiables include:
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IP Rights
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Seek to retain ownership of core IP such as:
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- your platform and underlying technology
- generic improvements, know-how, and tools
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Liability Cap
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Aim for:
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- an aggregate cap tied to 12 months of fees payable or total fees paid
- carve-outs you can actually price and insure
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Scope
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Clearly define what is and isn’t included (e.g., a SaaS subscription, license, or product sale) and how additional services will be handled, for example:
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- separately scoped
- time-boxed
- and fee-based
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Data security and privacy obligations
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Over-promising here can create risk that often can’t be saved by an indemnity cap. Before committing, consider operational realities, such as:
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- what data you actually process
- shared responsibility models
- certifications you truly maintain
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AI Usage
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AI provisions that don’t align with how a product actually works can introduce risk and operational friction. Areas of focus include:
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- internal, non-customer-facing AI that will be used to operate and secure the service
- disclosure or approval requirements in the context of operational realities
- protection of proprietary information
- ownership of platform tools/learned improvements
- liability structures that align with scope of services and areas within company control.
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5. Give sales simple scripts (before they promise the moon)
Deals often go off the rails when sales says “sure, we will use your paper” before legal has a chance to review it.
Instead, consider arming the sales team with clear, plain language guidance that speaks to recurring scenarios and helps to prevent surprises later. For example:
Initial response:
“We typically use our standard SaaS agreement because it reflects how the platform is delivered and supported. Using services templates has slowed deals down in the past. Can we start from our agreement and address any specific concerns?”
If the customer insists on their MSA, follow-up with:
“We can usually work with customer MSAs as long as we attach our SaaS addendum to address IP, uptime, and data security. That’s how many of our larger customers handle it.”
When risk is too high, then consider
“We want to move forward, but some of these terms would require us to accept risks we can’t realistically manage or insure. Can we walk through a short rider that aligns the contract with the actual services?”
6. Build the playbook before the next RFP
Mature companies don’t reinvent the wheel every deal. At a minimum, they typically have:
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- Core templates (a standard SaaS or software MSA, a data protection/security addendum, SLAs and support policies)
- Supporting materials (a customer-MSA SaaS rider or short SaaS addendum designed for third-party templates)
- Internal thresholds and walk-away positions (uncapped liability, IP assignment, unlimited indemnities)
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When sales and customer success are then trained on why these terms matter, enterprise customers tend to notice this process maturity.
7. When to push hard — and when to be flexible
Consistency often matters more than perfection, with many organizations defining where to hold firm and where flexibility is appropriate.
Areas that often warrant closer attention:
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- IP ownership of your product is unclear or assigned
- liability is uncapped or wildly disproportionate
- indemnities extend beyond your control
- security obligations don’t match your stack
Areas where flexibility may be appropriate:
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- issues are mostly cosmetic
- deployment risk is genuinely low
- your addendum controls key product terms
8. Final option: fully redlining the customer’s paper (yes, really)
Sometimes none of the above works. But the deal still matters, leaving unresolved issues to be addressed through targeted revisions to the customer’s paper.
Targeted redlines may include:
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- Removing assumptions about scope of services
- Revising IP ownership and license terms
- Narrowing indemnity provisions
- Establishing appropriate liability caps
- Clarifying distinctions between product and services
It’s not elegant.
It’s not fast.
But it’s often better than signing a fundamentally broken contract.
Experienced counterparties understand this—even if they pretend not to at first.
Key Takeaways
There is no single right way to handle a customer insisting on their paper. The right approach often depends on the deal, the parties, and the underlying risk profile.
What tends to matter most is recognizing when the contract no longer reflects the actual product or commercial relationship—and addressing those gaps before they become embedded in the agreement.
A consistent, well-structured approach can help companies navigate these situations more efficiently, protect core business interests, and keep deals moving forward.
Because the contract should reflect the deal you’re actually doing – not the one the template assumes.
For the playbook-version of this post, click here.
Jason Karp is a Member of our New York-area team with more than 30 years of experience in the telecom, technology, media, XaaS, and public safety industries. Jason works with businesses of all sizes, handling a wide range of complex commercial and corporate transactions, as well as business operations and market strategy, corporate governance, compliance program development and implementation, and regulatory and policy advocacy and strategy. When customers insist on using their contract templates, misalignment can create real risk. A practical guide to navigating the issue while keeping deals moving.