Putting Strategy into SaaS Purchases

There is little doubt that organizations are looking to software-as-a-service (SaaS) as more than just a means to cut their costs. In a recent post of SaaS buying trends, I shared Software Insider Ray Wang’s opinion that "SaaS will be the predominant entry point for new innovation" moving forward.

But will organizations benefit from this innovation without a methodical approach to SaaS?

That’s a fair question, considering the apparent proliferation of stealth SaaS purchases, made by business units that buy software with no input from IT. These kinds of purchases no doubt improve the performance of individual business units but may not offer broad organizational benefits. In fact, they may ultimately make it tougher to achieve organizational goals by strengthening existing informational silos and creating new ones. Does anyone really want more silos?

Forrester Research analyst Liz Herbert, in a CIO.com column, suggests better governance is needed and mentions that sourcing executives should educate business units about SaaS and the cloud by developing SaaS position papers and contract guidelines and templates for SaaS deployments. It’s one of her five considerations for getting more strategic about SaaS.

The other four considerations:

• Research the growing SaaS options. They have expanded far beyond contact management, sales force automation and HR applications to include nearly every kind of application that might be used by an organization. Some SaaS providers offer the option of purchasing suites of software rather than standalone apps. Again, sourcing execs should take the lead on educating business units, Herbert says. It’s also important to keep an eye on your traditional on-premise vendors’ SaaS activities, as many of them are adding SaaS options.
• Work with security staff to ensure appropriate levels of security for different SaaS applications. Herbert rightly points out that certain apps will require higher levels of security because they involve confidential data while others will possess stricter requirements for archiving and retention. A lot of SaaS providers are tossing out terms like "SAS 80 Type II" or "ISO 27001." Sourcing execs should make sure they know what those terms actually mean.
• Determine strategies for price negotiation and TCO analysis. Herbert points out that SaaS prices are not set in stone. SaaS buyers can often negotiate lower prices if they’re willing to sign longer deals or opt for a higher or new edition of a product, she says. Look for other ways of controlling costs, such as asking for caps on price or lock-in options for future years, or an ability to scale down unused seats on an annual or quarterly basis.
• Evaluate professional services options. Herbert says SaaS vendors and systems integrators can help organizations take advantage of emerging best practices for SaaS implementations. This seems especially important, given that desire for speedy deployments and lack of internal resources are two reasons organizations often cite for using SaaS.

Herbert’s suggestions mesh nicely with a piece published on our sister site CTO Edge, called The Long and Short of Assessing Cloud Computing Providers. Among the advice in that piece, authored by Frank Ohlhorst, is a short checklist of questions to ask when identifying applications to move into the cloud.