The EU Data Act Just Killed Long SaaS Contracts

What the Law Says

The Data Act entered into force in January 2024, but the obligations become applicable from 12 September 2025. Chapter VI, which regulates switching between data processing services, is the part that will have the most visible impact on SaaS.

The intention behind the law is clear. The European Commission wants to make switching “free, fast, and fluid” to reduce vendor lock-in and promote a more competitive digital economy.

According to global law firm DLA Piper:

“The law sets a maximum two-month notice period, even for multi-year deals. No more being stuck in a 24-month contract just because the business changed direction.”

This means:

• Customers can terminate for convenience with a notice period of two months or less.

• The rule applies to new and existing contracts—so legacy agreements will not protect vendors.

• Providers must support easy data export and ensure switching is technically feasible.

• Early termination penalties are permitted only if they are transparent and reasonable.

• From 12 January 2027, even those penalties disappear: no cancellation fees are allowed at all.

The scope is broad. It covers SaaS, PaaS, and IaaS. Protected customers are any private individual or business located in the EU. And importantly, non-EU providers serving EU customers are covered as well. A US SaaS company selling into Europe must comply.

Why This Matters

For years, SaaS economics have relied on long-term contracts. Annual and multi-year deals gave companies predictable revenue, secured cash flow, and often justified discounts. Vendor lock-in was part of the business model.

The Data Act breaks that model. From September 2025, a two-year contract with quarterly billing has little meaning if the customer can walk away after twelve months with only two months’ notice. Even worse for vendors, a customer can cancel after six months, and the provider has no legal grounds to enforce the remaining eighteen months.

This is a dramatic change. It shifts leverage toward customers and forces SaaS providers to rethink pricing, packaging, and customer retention strategies.

Winners: Customers

The obvious beneficiaries are customers. The law essentially hands them a universal “exit button.”

B2B customers, who previously had to negotiate termination rights case by case, now gain statutory protection. Imagine the scenario of the recent Salesloft/Drift contract dispute. Under the new rules, customers will no longer need to argue or litigate. They can simply terminate the contract with two months’ notice.

This will increase churn. Customers will have more freedom to test competitors without being tied down. They will be more demanding, knowing they are not locked in. And they will have greater leverage when negotiating renewals.

Vendor lock-in is effectively a thing of the past in Europe.

Losers: SaaS Vendors Relying on Long Contracts

The businesses that will feel the most pain are SaaS providers that depend on annual or multi-year contracts.

For these vendors:

• Annual contracts lose much of their value. Customers can leave mid-term, undermining the predictability of revenue streams.

• Discounted multi-year deals become pointless. Why offer 20 percent off for a three-year commitment if the customer can exit after one?

• Revenue forecasting becomes more volatile. Churn risk increases, forcing finance teams to adjust their models.

Customer success and retention become even more important. SaaS providers cannot rely on legal contracts to hold on to customers; they must deliver continuous value.

What SaaS Companies Should Do

This is not legal advice, and every provider should consult their own counsel. But based on analysis of the law and commentary from experts, several practical steps stand out.

1. Shift to prepaid contracts
   Ensure that all contracts are prepaid. Make it explicit that prepaid amounts are non-refundable in the event of termination for convenience. This allows you to secure revenue upfront without breaching the law.
   
   

2. Multi-year deals only with upfront payment
   If you still want to offer 24- or 36-month contracts, require full prepayment. Make it clear that while termination for convenience is possible, refunds are not. This preserves the commercial logic of long-term commitments.
   
   

3. Strengthen contract language
   Contracts must clearly state:
   
   

   • What happens when a customer terminates.

   • How data export works.

   • What penalties (if any) apply.

Vague or ambiguous terms will work against the provider. Without explicit language, you may be forced to refund unused prepaid fees.

4. Invest in portability and interoperability
   The law obliges providers to make data export and switching smooth. This means building APIs, offering machine-readable formats, and ensuring that customers can migrate without losing functionality. Providers who do this well will turn a regulatory burden into a trust signal.
   
   

5. Rethink customer success
   Retention cannot rely on lock-in. SaaS companies must double down on value delivery, product stickiness, and proactive customer success strategies.

The Bigger Picture

The EU is sending a clear message: in the digital economy, customer choice comes first. Just as the General Data Protection Regulation reshaped how companies handle personal data, the Data Act reshapes how they handle contractual power.

For SaaS vendors, this is frustrating. It undermines a proven business model and creates financial uncertainty. But it is also an opportunity. Providers that embrace transparency, fair pricing, and customer-centric design may gain a competitive edge.

It also raises strategic questions:

• Will SaaS companies outside the EU adjust global terms to match, creating de facto global standards?

• Will enterprise procurement teams use the EU rules as leverage, even outside Europe?

• Will investors revise their assumptions about SaaS revenue predictability in European markets?

These are not theoretical issues. They will shape boardroom conversations over the next 12 months.

Final Thought

I spent several hours researching this topic, and while I am not a legal expert, the direction is clear. The EU Data Act is a major regulatory shift. SaaS companies cannot ignore it.

If you are a provider, coordinate with your legal and commercial teams now. Review your contracts, update your pricing models, and prepare for higher churn. If you are a customer, understand your new rights and how to use them.

This law fundamentally reshapes the SaaS landscape in Europe. By 2027, with all cancellation fees banned, switching will be free, fast, and fluid. Those who prepare early will adapt. Those who do not may find themselves bleeding customers.

Further Reading

• Latham & Watkins: EU Data Act – Significant New Switching Requirements

• Bird & Bird: The Data Act – What Mandatory Switching Rights Mean for Fixed-Term SaaS Models