For years, SaaS contracts have been predictable. Companies offered two simple options:
- Monthly subscription: higher price, full flexibility.
- Annual subscription: discounted rate, commitment required.
Customers understood the trade-off. Flexibility cost more, while loyalty earned savings. Companies got the stability of multi-year contracts, while CFOs and investors enjoyed predictable revenue forecasts.
But the EU Data Act, which became fully effective on September 12, 2025, has rewritten the rules. The Data Act entered into force earlier in 2025, marking a significant legal milestone in the EU’s data regulation framework.
The EU Data Act: What Changed
The new regulation fundamentally alters SaaS commercial models by granting enhanced termination and switching rights to customers to protect them from being locked into multi-year contracts:
- Customers can switch to another SaaS provider and terminate any SaaS contract with just two months’ notice, regardless of contract length.
- Switching and portability are mandatory: providers must allow customers to export their data in machine-readable formats and support transitions to competitors or in-house environments.
- Providers can’t impose “unreasonable barriers” to switching.
- Early termination fees are not banned, but they must be fair and transparent.
- A switching request obligates providers to facilitate customer switches, impacting contractual obligations and early termination processes, and ensuring that customers can move their data and services without undue delay or penalty.
- Fixed term contracts are specifically affected, as the Act grants customers the right to terminate and switch providers before the end of the contract term, with restrictions on early termination fees and requirements for fair switching rights.
Business impact:
- Long-term contracts, the foundation of SaaS predictability, are weakened.
- Revenue predictability is reduced as customer churn and switching increase.
- Pricing models may need restructuring to account for shorter customer lifecycles and more frequent refund scenarios.
- Standard MSAs must be updated, and existing EU contracts require addenda to reflect new termination, portability, and switching clauses.
In other words, the foundation of SaaS monetization, contract length, is no longer the safeguard it once was. The Act applies to cloud providers, cloud services, and other data processing services, including SaaS, IaaS, and PaaS. It requires functional equivalence when customers switch providers, ensuring no loss of service functionality. The regulation defines data processing services as those offering on demand network access, elastic computing resources, and the ability for resources to be rapidly provisioned with minimal service provider interaction. Due to the highly distributed nature of these services, the Act enables ubiquitous access to computing services across multiple locations. Its scope includes connected products, related digital services, related services, and digital services, aiming to foster data driven services and innovation. The Act imposes obligations around data transfer, data sharing, data shared, data generated, generated data, usage data, and requires the data holder to make such data accessible and portable while protecting trade secrets.
A New Commercial Scenario
Let’s play this out with a real-world example:
- You buy Adobe Creative Cloud.
- Option 1: $60/month, cancel anytime.
- Option 2: $600/year (a $120 discount vs. monthly).
Now imagine:
- A EU customer chooses the annual plan, paying upfront.
- After 6 months, they cancel under the EU Data Act.
The customer’s perspective:
“I should get half my money back. Six months used = $300 value, so refund me $300.”
The company’s perspective:
“You only got that $600 annual rate because you committed to 12 months. If you leave early, the discount no longer applies. We’ll reprice your first 6 months at the monthly rate ($60 × 6 = $360), and refund the remainder ($240).”
Here, the refund is $240 (not $300). The company claws back $60 by reversing the upfront discount.
This dynamic will play out across every SaaS company selling into Europe.
Why This Matters for Pricing Strategy
This EU Data Act forces SaaS companies to rethink three core elements:
- Discounting Logic
- Annual and multi-year discounts can no longer be assumed “earned” upfront.
- Discounts must be structured as conditional on full-term completion.
- Refund Policies
- Expect a shift from pro-rata refunds to true-up refunds.
- Companies will reprice the used portion of the contract at monthly rates, issuing smaller refunds on early cancellations.
- Forecasting & Pricing Model
- Finance teams must model both churn risk and refund liability.
- Traditional NRR/GRR metrics may fluctuate more as customer lifecycles shorten.
- Vendors may experiment with new commercial terms—e.g., flex plans, earned-discount milestones, or usage-based pricing to adapt.
To ensure compliance with the new regulation, companies should review and update their internal processes, including operational workflows, legal agreements, and data management practices.
The Accounting Collision
Here’s the challenge: legal creativity doesn’t override accounting rules.
Under ASC 606 and IFRS 15, revenue recognition must reflect the economic reality of the contract. If a discount was given assuming 12 months of service but the customer cancels early:
- Revenue already recognized at discounted rates must be reversed.
- Past periods may need to be repriced at higher (monthly) rates.
- Deferred revenue balances and refund liabilities must be recalculated.
This isn’t optional, it’s compliance. And without automation, it becomes a nightmare of manual journal entries, spreadsheets, and audit risk.
Mitigating Commercial Imbalances
The EU Data Act introduces a new era for data processing services, fundamentally shifting how service providers manage customer relationships and commercial risk. With the Act’s strong emphasis on data portability and the right to switch providers, SaaS companies and other providers of data processing must rethink their business models to ensure compliance and competitiveness.
To mitigate commercial imbalances, service providers need to prioritize technical solutions that enable customers to move their data with minimal management effort. This means investing in standardized APIs and interoperable data formats that make data export and transfer between services seamless. Automated data export tools are no longer a nice-to-have—they are essential for meeting the Data Act’s requirements and ensuring that customers can exercise their rights without friction.
Pricing models must also evolve. The Data Act allows for proportionate early termination penalties, giving providers a way to offset the financial risks of customer switching while still respecting the new regulatory landscape. These penalties must be fair, transparent, and clearly communicated in customer agreements. By structuring early termination fees in a way that reflects actual costs, service providers can protect their revenue streams without discouraging customers from switching when it makes sense for their business.
Contractual flexibility is equally important. Providers should review and update their customer agreements to reflect the new rights and obligations introduced by the Data Act. This includes clear terms on data access, data export, and the process for switching data processing services. Ensuring that these agreements are aligned with the Act’s requirements not only reduces legal risk but also builds trust with customers.
The Data Act also places new responsibilities on data holders, requiring them to provide access to data on fair, reasonable, and non-discriminatory terms. Service providers must be prepared to respond to data access and data export requests efficiently, leveraging technical solutions that automate these processes and minimize delays.
It’s important to recognize that the Data Act is part of a broader wave of recent EU digital laws designed to foster data-driven innovation and reduce vendor lock-in. Its provisions complement the General Data Protection Regulation, which already set high standards for personal data protection. Now, with the Data Act, the focus expands to include non-personal data and the operational realities of switching between digital services.
Ultimately, mitigating commercial imbalances under the EU Data Act requires a proactive, customer-centric approach. By embracing technical solutions for data portability, updating business models to allow for fair early termination penalties, and ensuring contractual clarity, service providers can reduce vendor lock-in and enable customers to fully leverage their digital assets. This not only ensures compliance with the latest EU regulations but also positions providers to thrive in a more open, competitive, and innovative digital services market.
A New Use Case for Revenue Recognition Systems
The EU Data Act introduces a brand-new use case: dynamic discount and refund adjustments tied to early cancellations.
Finance leaders will need systems that can:
- Detect mid-term cancellations automatically.
- Reallocate revenue when discounts are forfeited.
- Accelerate recognition where past months must be repriced.
- Adjust refunds accurately while preserving GAAP/IFRS compliance.
- Keep revenue forecasts updated in real time.
This is where agile and real-time revenue recognition becomes essential. It ensures revenue schedules adapt the moment a cancellation happens, so customers get the right refund, companies protect revenue fairly, and finance stays compliant.
The MSA and Operational Impact
The EU Data Act doesn’t just affect pricing, it directly impacts how vendors must structure contracts and operations:
- Standard MSAs must be updated with EU-specific clauses for termination rights, data portability, and switching assistance.
- Existing contracts with EU customers require addenda to comply retroactively.
- Vendors must build technical capabilities for data export and switching, including open interfaces, standardized transfer protocols, and documented procedures.
- Customer Success and Finance teams must coordinate closely, as termination rights now directly affect both commercial and accounting outcomes.
For SaaS leaders, this isn’t just a pricing change, it’s a full commercial, contractual, and operational reset.
Broader Implications for SaaS Monetization
The EU Data Act forces SaaS companies to rethink how they monetize:
- Contracts ≠ predictability. Multi-year terms no longer guarantee stability.
- Agility = confidence. Systems, not signatures, will protect revenue.
- Packaging must evolve. Discounts, refunds, and commitments need new structures…think earned discounts or usage-based models.
- Finance = strategy. Revenue recognition now sits at the core of monetization.
Agility Equals Predictability
The SaaS playbook has long assumed that contract length guaranteed predictability. The EU Data Act has rewritten that equation.
The winners will be the companies that adapt fastest by rethinking discounting, rewriting MSAs, and upgrading revenue recognition systems to handle a world where cancellation is always just two months away.
