Big SaaS Done Right

These organizations are floating more and more applications into the cloud. They're scaling up, while keeping a keen eye on the risks and rewards.

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Greene says Guardian starts by clearly defining the service it's signing up for. "Make sure you have a defined service, not a product name. And ensuring that baseline functions won't change with updates to the SaaS application is critical," he says. "You want to make sure you're getting your minimum [requirements] around security and functionality [and that] they can't dumb down the product in a future release."

Limitations of liability clauses can be a major sticking point. "[The vendors] want no liability, and we want unlimited liability," says Wander. As with remediation for failure to provide service at agreed-upon levels, providers usually limit liability to a refund of up to the total dollar amount of the contract -- or a prorated service credit. "But if a service is buggy, do you really want more of something that's bad? It's better to get a promise of better service or a certain termination right," says Weiss. Likewise, a data breach can easily cost more than the value of the contract.

Finally, contract pricing can come back to bite you, and vendors don't like to make downward price adjustments for changing user counts, as McKenzie discovered. "We need the ability to scale up and down. SaaS doesn't work that way. That's been our most heinous fight," she says, because vendors wanted to lock Fox Entertainment Group into a volume purchase agreement for three or five years.

Wander had better luck. "We have a five-year contract that locks in terms and conditions but trues up on an annual basis. We've gotten very good terms in many cases," he says. But Guardian is a big account, he admits, adding, "I don't think everyone can achieve that."

There are two other ways to improve your negotiating position, says Weiss. One is to announce up front that you'll be doing competitive bidding, and then take the most favorable contract terms and pricing from each proposal and ask vendors to meet them. Another is to work with a reseller. "They can help out with terms," he says.

Other Challenges

Still, SaaS isn't a fit for every application or large business. Boeing provides SaaS applications to its customers at but uses only about a half-dozen SaaS offerings itself -- in part because it's a defense contractor and must adhere to strict data security requirements. "Things that hold lots of intellectual property are way out of scope for SaaS," says Ted Colbert, vice president of IT infrastructure at the aerospace giant.

Integration issues present another potential challenge. For example, Boeing's current HR applications for recruiting, staffing and other functions are built around a data warehouse. "To use SaaS, we would have to build more interfaces than we have today, which would drive our complexity higher," Colbert says.

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