Top 10 SaaS Traps: Watch Out For Hidden Snags

3) Missing SLAs. Service-level agreements, such as those guaranteeing vendor response time, are a critical component of SaaS contracts, says Mankowski. Some vendors provide SLAs with the contract, while others charge extra fees for SLAs or don't provide them at all, he says. "If it's a business-critical application and you need five 9s uptime, you need to make sure that's covered in the agreement with your SaaS provider," Mankowski says. Also, contracts should stipulate penalties such as credits or givebacks if service levels aren't met, says Jeff Kaplan, managing director at ThinkStrategies Inc., a consulting firm in Wellesley, Mass.

4) Performance levels. Customers should clearly define software uptime and availability levels with SaaS providers in writing. Before entering into an agreement with a SaaS provider, customers should ask the vendor for a record of past performance levels, says Kaplan. It's also wise to ask about business plans and investments that the provider is planning to make over the next three to 12 months, including enhancements to service-delivery capabilities, says Kaplan.

Customers should also ask how they will be contacted if there's a service disruption, and they should find out how much time the vendor has to fix the problem under the contract, says Mankowski.

5) Defining uptime. SaaS customers need to carefully define guarantees around system uptime, says DeSisto. Most contracts call for 99.5% uptime or part of your money back for a month. "But what does that mean?" asks DeSisto. "Is that 99.5% of planned uptime? Does the vendor plan to be down eight hours a month? If so, which hours?"

6) Add-on costs. SaaS customers should scour the fine print for hidden expenses. Sometimes vendors charge to configure the software or implement the database or workflow processes, says DeSisto. In some cases, vendors charge an additional $18 to $25 per user per month to stage and test the software, he says. And if you want to add support for handhelds and other mobile devices, those costs can escalate to $45 per user per month.

Vendors also may try to predetermine the amount of storage that's available for each end user in your organization and bill for overage charges. "So many people are buying SaaS based on price. They need to understand what the base product is and how much all the add-ons cost," says Rob Scott, managing partner at Scott & Scott LLP, a Dallas-based law firm.

Customers should also ask whether training is "baked into" the cost of the service or if there are additional costs for training or support, says Mankowski.