AI Overview

What does the market expect from confidentiality clauses in software contracts?

Confidentiality provisions are among the most negotiated clauses in SaaS contracts because they determine how each party protects sensitive business information. While vendor and customer contracts often begin with different positions, negotiations overwhelmingly result in confidentiality protections for both parties. Contract Benchmarking helps organizations understand whether confidentiality provisions align with market expectations before negotiations begin.

Confidentiality Is More Than a Legal Requirement

Every commercial relationship depends on trust.

Before customers share proprietary data, business plans, pricing models, source code, or customer information, they need confidence that the receiving party will protect it appropriately.

That's why confidentiality clauses appear in nearly every SaaS agreement.

But while nearly every contract contains confidentiality language, not every confidentiality clause reflects market standards.

Some provisions heavily favor vendors.

Others disproportionately protect customers.

Many become negotiation bottlenecks because neither party wants to accept unnecessary liability.

Understanding how confidentiality provisions compare across the market allows legal and procurement teams to negotiate from evidence instead of assumptions.

Key Takeaway

Confidentiality clauses rarely fail because they're missing—they create friction because their obligations differ from what the market considers reasonable.

What Is Confidential Information?

Confidential information generally includes non-public business information shared between contracting parties that has commercial value and requires protection. As described in the source article, this may include business strategies, customer information, passwords, financial information, marketing plans, technical documentation, and other proprietary information.

The exact definition varies by agreement, making it one of the most negotiated provisions in software contracts.

Questions commonly negotiated include:

• What information qualifies as confidential?
• Which information is excluded?
• How long do confidentiality obligations last?
• What level of protection is required?
• What remedies apply if confidential information is disclosed?

These decisions directly affect legal risk, customer trust, and operational responsibility.

Why Confidentiality Clauses Create Negotiation Friction

Confidentiality obligations represent a classic negotiation tradeoff.

Every organization wants its own information protected.

Fewer are eager to assume broad obligations for protecting someone else's.

The original research describes confidentiality commitments as a "double-edged sword." Providing contractual protection builds trust while simultaneously increasing legal responsibility if those obligations are breached.

That tension explains why confidentiality provisions receive significant legal attention during negotiations.

What the Market Data Shows

TermScout analyzed:

• 647 vendor contracts
• 103 customer contracts
• 101 negotiated contracts

to understand how confidentiality provisions evolve from initial contract language to final negotiated agreements.

Rather than asking what one contract says, this approach reveals what the market actually accepts.

That distinction is the foundation of Contract Benchmarking.

Vendor Contracts: Protection Is Common, but Not Universal

Vendor agreements generally protect both vendor and customer confidential information at nearly equal rates.

According to the research:

These numbers suggest that vendors recognize confidentiality as an important commercial expectation, even though accepting those obligations increases potential liability.

For buyers, these statistics establish a useful benchmark during procurement.

If a proposed vendor agreement lacks confidentiality protections entirely, it may warrant closer review because it differs from what many vendors already provide.

Customer Contracts Tell a Different Story

Customer-drafted agreements demonstrate a noticeably different negotiating strategy.

According to the data:

The pattern is clear.

Customers overwhelmingly prioritize protecting their own confidential information while being less likely to extend equivalent protections to vendors in their initial contract positions.

This highlights an important negotiation insight:

Opening positions rarely reflect final agreements.

Negotiated Contracts Reveal the Real Market Standard

The most valuable insight comes from the negotiated agreements.

After negotiation:

The data shows that negotiations dramatically increase confidentiality protections for both parties. At the same time, only about half of negotiated agreements end with fully identical obligations, indicating that parties often tailor confidentiality requirements to their respective risks and business needs.

Benchmarking Insight

Market standards don't necessarily require identical confidentiality obligations—they require commercially reasonable protections that both parties are willing to accept.

What This Means for Procurement and Legal Teams

Without market context, every confidentiality negotiation feels unique.

With Contract Intelligence and Contract Benchmarking, organizations can quickly determine:

• Whether confidentiality provisions align with market norms
• Which obligations are likely to generate negotiation
• Where contractual language introduces unnecessary commercial risk
• Whether a requested revision is common or unusually aggressive

This helps procurement and legal teams prioritize negotiations that materially affect risk instead of spending time debating standard language.

Contract Signals to Watch

Certain confidentiality provisions consistently indicate higher negotiation risk.

These include:

• Broad definitions of confidential information
• One-sided confidentiality obligations
• Unlimited confidentiality periods
• Weak exceptions for publicly available information
• Vague security obligations
• Broad disclosure rights to affiliates or third parties

Identifying these Contract Signals early enables organizations to resolve concerns before they delay procurement or sales.

Frequently Asked Questions

What is a confidentiality clause?

A confidentiality clause defines how parties must protect non-public information shared during a business relationship and establishes the obligations, exceptions, and remedies related to that information.

Why are confidentiality clauses heavily negotiated?

Because they allocate legal responsibility for protecting sensitive information while balancing commercial risk for both parties.

What is the market standard for confidentiality clauses?

The research indicates that negotiated SaaS agreements almost always include confidentiality protections for both parties, although the obligations are not always identical.

How does Contract Benchmarking help?

Contract Benchmarking compares confidentiality language against hundreds of market agreements, helping legal and procurement teams determine whether proposed language reflects common commercial practice or represents an outlier.

Turn Confidentiality Clauses Into a Strategic Advantage

Confidentiality provisions do more than protect sensitive information, they influence trust, negotiation efficiency, and commercial relationships.

The data shows that while vendors and customers often begin from different positions, negotiations consistently move toward stronger protections for both parties. That insight is valuable because it helps organizations distinguish between routine negotiation and genuinely unusual contract language.

Rather than evaluating confidentiality clauses in isolation, leading legal and procurement teams use Contract Benchmarking, Contract Intelligence, and Contract Signals to understand how proposed language compares to the broader market.

When contracts are benchmarked against real market data, negotiations become faster, risk assessments become more objective, and decisions become easier.

Want to know whether your confidentiality provisions reflect market standards? Benchmark your contracts with TermScout and gain the data-driven insights needed to negotiate with confidence.