Building a SaaS product involves privacy considerations that go beyond what a simple website or e-commerce store faces. You're not just collecting data from visitors—you're storing and processing your customers' data, often including their customers' data. The relationship is more complex, the stakes are higher, and the documentation requirements are more extensive.
I've worked with SaaS startups who thought their website privacy policy covered everything. It didn't. They needed separate policies for their application, data processing agreements for their customers, and a clear understanding of their role as a data processor.
Controller vs. Processor: Understanding Your Role
Under GDPR and similar laws, there's a crucial distinction between data controllers and data processors:
Controller: The entity that determines the purposes and means of processing personal data. The controller decides what data to collect and why.
Processor: The entity that processes personal data on behalf of a controller. The processor follows the controller's instructions.
As a SaaS company, you're typically both, depending on whose data you're handling:
You're a controller for your customers' account information—the email addresses they use to sign up, their billing details, their support interactions with you.
You're a processor for the data your customers upload to and store in your system—their contacts, their files, their business data. Your customers are the controllers of that data; you process it on their behalf.
This dual role creates dual obligations. You need a privacy policy for your own data collection and a framework for handling the data you process for customers.
Your SaaS Privacy Policy
Your privacy policy should cover data you collect as a controller:
Account and Registration Data
What information do you collect when customers sign up? Name, email, company information, payment details? Explain what you collect and how it's used for account administration and billing.
Usage Analytics
Do you track how customers use your application? Most SaaS products do—feature usage, session duration, error occurrences. Disclose this analytics collection and its purposes (improving the product, understanding user behavior).
Support and Communication
When customers contact support or receive your emails, what data do you retain? Support ticket history, email engagement metrics, survey responses?
Cookies and Tracking
Your application likely uses cookies for session management and potentially for analytics. Your marketing site might have additional tracking. Cover both contexts.
Customer Data
Your privacy policy should explain your relationship to the data customers upload. Make clear that customers own their data, that you process it to provide the service, and that you don't use it for other purposes (like advertising or selling to third parties).
Data Processing Agreements
When your customers are subject to privacy regulations (especially GDPR), they need assurance that their data processors—including you—meet certain standards. This is where Data Processing Agreements (DPAs) come in.
What a DPA Covers
A DPA is a contract between controller (your customer) and processor (you) that documents:
- The subject matter and purpose of processing
- Types of personal data processed
- Categories of data subjects
- Duration of processing
- Obligations and rights of both parties
Required Commitments
GDPR Article 28 specifies what a DPA must include. Key commitments:
Process only on instructions: You only process data as instructed by the customer (for providing the service), not for your own purposes.
Confidentiality: Personnel with access to data are bound by confidentiality obligations.
Security measures: Appropriate technical and organizational measures to protect the data.
Sub-processor restrictions: You don't engage sub-processors without the customer's authorization, and you ensure sub-processors meet similar obligations.
Assistance obligations: You help customers respond to data subject requests and comply with their legal obligations.
Data return/deletion: At the end of the relationship, you return or delete the customer's data.
Audit rights: Customers can verify your compliance, typically through audit reports or questionnaires.
Implementing DPAs
For smaller SaaS products, a standard DPA that's part of your terms of service is usually sufficient. Customers agree to your terms, which include the DPA provisions.
Enterprise customers often want to negotiate DPAs or use their own templates. Be prepared for this—it's a normal part of B2B sales.
Sub-Processors
As a SaaS provider, you likely use other services to deliver your product—cloud hosting, email delivery, payment processing, analytics. When these services process your customers' data, they're sub-processors.
Sub-Processor Disclosure
GDPR requires that you inform customers about sub-processors. Most SaaS companies maintain a sub-processor list—a public page listing the third-party services you use and what data they process.
This list should include the sub-processor name, their purpose (hosting, analytics, email), and their location.
Managing Sub-Processor Changes
When you add new sub-processors or significantly change existing ones, customers should be notified. The typical approach is to maintain the sub-processor list online and commit to notifying customers (usually by email) of material changes with some advance notice period.
Some customers will want the right to object to new sub-processors. Your DPA should address how objections are handled.
Security Disclosures
Enterprise SaaS buyers increasingly expect detailed security information. This often appears in:
Security Practices Page
A public page describing your security measures—encryption, access controls, monitoring, incident response, employee practices. This doesn't reveal sensitive details but demonstrates security maturity.
Compliance Certifications
Certifications like SOC 2, ISO 27001, or industry-specific standards (HIPAA for health data, PCI DSS for payment data) provide third-party validation of your security practices.
These certifications require investment but significantly accelerate enterprise sales by providing documented assurance.
Security Questionnaires
Enterprise customers often send lengthy security questionnaires asking about your practices. Standardized formats like SIG (Standard Information Gathering) or CAIQ (Consensus Assessment Initiative Questionnaire) help, but you'll still receive custom questionnaires.
Having documented security practices makes these questionnaires manageable rather than a scramble.
Data Residency and Transfers
Where is customer data stored? For many SaaS products, it's in cloud infrastructure in the US or distributed globally. This raises data transfer issues for customers with EU data.
Addressing Transfer Concerns
Options include:
EU hosting: Offering data residency in EU regions of major cloud providers.
Transfer mechanisms: Using Standard Contractual Clauses (now part of your DPA) or relying on adequacy decisions or the Data Privacy Framework for US transfers.
Documentation: Being transparent about where data is stored and what safeguards exist.
Handling Data Subject Requests
Under GDPR and other laws, individuals have rights to access, delete, and port their data. As a SaaS provider, requests can come from two directions:
Your customers: When a customer wants to access or delete their account data, you handle this directly—they're exercising rights regarding data you control.
Your customers' users: When someone's data is stored in your system by your customer, requests should go to your customer (the controller), not to you. But you need tools and processes to help customers fulfill these requests.
Self-service tools for data export and deletion help both compliance and customer satisfaction. The ability for customers to find and export data about a specific individual—or delete it—is increasingly expected.
Incident Response and Breach Notification
Your DPA should address what happens if there's a security incident affecting customer data:
- Your commitment to notify customers promptly
- The timeframe for notification (24-72 hours is common)
- What information you'll provide about the incident
- How you'll assist customers with their own notification obligations
Have an incident response plan ready. When a breach occurs, you don't want to be figuring out processes under pressure.
Product Privacy Features
Beyond policies and agreements, consider building privacy into your product:
Data minimization: Don't collect more than you need. Every data point is a liability.
Access controls: Let customers control who within their organization can access what data.
Audit logs: Track who accessed what data when. This helps customers meet their own compliance requirements.
Data export: Make it easy for customers to get their data out in standard formats.
Data deletion: Provide reliable deletion that removes data from live systems and backups (with appropriate retention for backups).
Encryption: Encrypt data at rest and in transit. Consider customer-managed encryption keys for sensitive use cases.
Scaling Your Privacy Program
Early-stage SaaS products can often manage with basic privacy documentation and manual processes. As you grow and pursue enterprise customers, requirements escalate:
- Formal security certifications
- Detailed DPAs and sub-processor lists
- Regional data residency options
- Vendor security assessments
- Dedicated privacy and security roles
Build privacy into your operations incrementally. The investment pays off through enterprise sales, customer trust, and reduced risk.