How you distribute software is a strategic legal choice as much as a commercial one. The chosen model determines how you protect intellectual property, allocate risk, manage regulatory obligations and structure customer relationships. Below are four B2B distribution models commonly used by technology companies, the legal issues that matter for each, and concrete steps you can take to manage those issues in day-to-day contracts and operations.
On-premises licensing
In an on-premises licensing model, the customer operates the software on its own servers or devices rather than accessing it via the cloud. Although less fashionable than SaaS, it remains attractive where customers demand maximum control over their systems and data — for example in finance, defence, or other security-sensitive industries. For suppliers, it offers upfront licence revenue but shifts more responsibility onto the customer’s IT team.
Legal focus areas
- Licence scope. The agreement must define who can use the software, how many users or devices are permitted, and any territorial limits. Ambiguity creates scope for misuse and revenue leakage.
- Intellectual property safeguards. On-premises delivery increases the risk of copying or reverse engineering. Contracts should prohibit this, reserve audit rights, and link to technical protections such as licence keys or code obfuscation.
- Maintenance and upgrades. Customers often assume ongoing support. Define exactly what is included (bug fixes, patches) and what is chargeable (new versions, customisation).
- Warranties and compliance. Customers may expect the software to meet particular standards or regulatory requirements. Draft warranties narrowly and avoid open-ended promises.
Software-as-a-Service
In a Software-as-a-Service (SaaS) model, the supplier hosts the application and customers access it remotely, typically via subscription. The commercial appeal lies in recurring revenue, rapid deployment and scalability. Legally, however, the supplier retains day-to-day control of both the service environment and customer data, which creates obligations around uptime, security, and compliance across multiple jurisdictions.
Legal focus areas
- Service levels. Contracts should include realistic uptime commitments, clear definitions of downtime, and proportionate remedies such as service credits.
- Data responsibilities. SaaS suppliers often act as processors of client data. Contracts must set out who is responsible for security measures, breach notification, and compliance with privacy and cybersecurity laws in different jurisdictions.
- Subcontracting and hosting. Where third-party hosting providers or subprocessors are used, ensure obligations are “flowed down” contractually and customers are given appropriate transparency.
- Termination and exit. Customers need certainty about how their data will be returned or deleted at the end of the relationship, in what format, and within what timeframe.
- Jurisdiction. As SaaS services often cross borders, specify governing law and dispute resolution to avoid uncertainty.
Reseller and channel distribution
In reseller or channel models, software is sold to end customers through third-party partners such as distributors, resellers, or systems integrators. Companies choose this approach to expand into new territories, reach enterprise clients efficiently, or leverage partners’ local expertise. Legally, it adds complexity because contracts must govern multiple layers of relationships, protect intellectual property, and allocate liability between the vendor, the partner, and the end customer.
Legal focus areas
- Contract clarity and performance. Agreements should clearly define the roles and responsibilities of each party, including territories, exclusivity, and minimum performance expectations. This reduces disputes and ensures resellers understand their obligations.
- End-user licence enforcement. Even though the software is sold indirectly, the vendor’s rights must be preserved. Contracts should require resellers to flow down your licence terms to end customers, protecting IP and limiting unauthorized use.
- Liability and risk allocation. Clarify who is responsible for support, defects, or customer claims. Without clear allocation, vendors can be exposed to liability for actions taken by their partners.
- Compliance with competition and trade laws. Avoid contractual terms that could be interpreted as price-fixing or restricting resale in certain markets. Also consider export controls and sanctions if software crosses borders through the partner.
- Visibility and reporting. Ensure agreements provide the vendor with sufficient reporting on sales, deployments, and usage to monitor compliance, revenue, and market trends.
- Brand and marketing oversight. Resellers often promote your software using your brand. Set rules for how trademarks and marketing materials may be used to maintain reputation and consistency.
Managed or integrated software
In managed or integrated software models, your software is incorporated into another provider’s offering — either as a component of their product or as part of the services they deliver. This approach can expand market reach and generate additional revenue, but it also brings complex legal considerations, including responsibility for defects, compliance with applicable regulations, and obligations for updates, maintenance, and continuity of service.
Legal focus areas
- Scope of use. Contracts should clearly define how the partner may use, modify, or sublicense your software, and whether rebranding or embedding is permitted.
- Liability and indemnities. Allocate responsibility for defects, service failures, or customer claims, and include appropriate indemnities and liability caps.
- Regulatory compliance. Assign responsibility for meeting relevant industry regulations, certifications, and reporting obligations, especially if the integrated product or service falls under sector-specific rules.
- Maintenance and updates. Specify who is responsible for patches, upgrades, and security fixes, and set out the timing and procedures for delivering them.
- Continuity planning. Include provisions such as source-code escrow or contractual arrangements to ensure the partner can maintain critical functionality if your company cannot provide ongoing support.
- Audit and reporting. Preserve visibility over how your software is used in the partner’s offering to protect intellectual property and verify compliance with licence terms.
How We Can Help
If you are considering how best to distribute your software or want to ensure your contracts meet your business needs, book a free call with our lawyers. On-premises licensing, SaaS, reseller structures, and embedded software each present distinct opportunities and risks. The most successful companies align their contracts, compliance structures, and risk allocation with the realities of their chosen model. We specialise in supporting technology companies to put the right contractual framework in place.
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