PeopleSoft application, has passed a five-year total-cost-of-ownership evaluation and can be online in much
less time than it takes to upgrade PeopleSoft.
The most critical success factor, McKenzie says, was
involving the audit, security and compliance depart-
ments from the beginning. “It saved a lot of headaches.
If you try to do that work after the fact or when you’re
signing a contract, you’ve lost your negotiating power,”
she says. “The biggest surprise was how immature the
governance processes were for some of the smaller
SaaS vendors. We ended up pushing a number of
vendors to make changes to meet our standards.”
Guardian’s team follows a well-defined, formalized
process from start to finish, says CTO Richard Scott.
“Together we evaluate all aspects of technology solu-
tions. It’s based on a matrix and scoring and a very prag-
matic, objective way of looking at the solutions,” he says.
“We have good vendor management processes,”
which are part of Guardian’s governance model,
Wander says. Guardian has the same operational
processes for SaaS and on-premises software. “We
have operational performance management. We check
response times just as we would do internally. And we
take end-user satisfaction measures over time,” he says.
of New York, says organizations shouldn’t draw any
conclusions based on IT costs alone. The $1.5 billion
provider of home healthcare services has about a half-dozen SaaS deployments, including HR and CRM.
There’s also one application that its nearly 4,000
clinicians in the field use to order medical supplies.
In that case, Check says, “the software subscription
was higher than what we incurred in the past, but the
overall cost of the business process has gone down and
the value to the business has increased.”
At Guardian, upgrade-and-refresh cycles have tradi-
tionally consumed 12% of the shared services budget.
The move to SaaS, and an intense focus on expense
optimization, has transformed Guardian’s IT budget.
“What makes SaaS valuable is the continuous upgrad-
ing without the burden on our organization,” says Scott.
Today, 40% of the budget goes toward running and
maintaining existing operations, down from about
60% a few years ago, leaving more money to invest in
solving other business problems, says Wander.
Scaling Up the Contract
The contract sets the tone for the relationship with a
cloud services provider, says Wander. If you want to be
successful, he says, “focus on the contract.”
We need the ability to scale up and down. SaaS doesn’t work that way.
That’s been our most heinous fight.
Cindy MCKenzie, SENIOR VICE PRESIDENT OF ENTERPRISE APPLICATION SERVICES, FOX ENTERTAINMENT GROUP
A Disciplined Approach
Start scaling up SaaS with a centralized procurement
model, these executives say. Before Guardian developed its federated approach to technology acquisition,
its SaaS deployments didn’t always go through I T, says
Doug Greene, vice president of corporate systems,
security, risk and compliance at Guardian. That’s a
common problem, especially in large companies, according to Robert DeSisto, an analyst at Gartner.
“I get calls from sales organizations that are buying
directly from Salesforce.com outside of the IT procurement process,” he says. One client he spoke with had 19
individually negotiated Salesforce.com contracts, none
of which went through IT. That business was losing
its volume purchasing power, and contracts weren’t
getting the scrutiny they deserved, DeSisto says.
Both McKenzie and Wander say it’s also critical to
understand the fully loaded costs of hosting applications on-site and to include that in the technology acquisition model when comparing costs to SaaS alternatives. “We always do a five-year total-cost-of-ownership
evaluation that includes all costs, such as power, data
center resources and staffing,” says McKenzie.
But Tom Check, CIO at Visiting Nurse Service
Unfortunately, “cloud computing often is not amenable to in-depth negotiations,” says Russell Weiss, a
partner at Morrison & Foerster, a law firm that specializes in negotiating service agreements. “Click-wrap agreements” — the ones users typically opt for when signing
up for SaaS offerings online — are the norm for small
and medium-size businesses. “They’re full of ‘outs.’ When
you read the fine print, it can be very alarming,” he says
(see “Would You Sign This Contract?” on page 14).
Fox’s McKenzie says it’s critical to think about
contract terms and conditions early in the process
by making clear what terms the organization can
live with and which ones are nonstarters. “I have a
requirements template, request for information and
request for proposal templates, and a contract template
with all of our criteria,” she says. Included are canned
paragraphs covering important areas such as information security. “If they can take that, we don’t need to
involve information security again,” McKenzie says.
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
