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 pro-
posal and ask vendors to meet them. Another is to work
with a reseller. “They can help out with terms,” he says.
Still, SaaS isn’t a fit for every application or large business. Boeing provides SaaS applications to its customers
at MyBoeingSuite.com 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.
Also, with 160,000 employees, the ability of SaaS
providers to scale is a concern. “We haven’t seen that
play out yet,” he says.
And Boeing’s complex business processes would
require extensive customization of any SaaS application. “The traditional SaaS offerings don’t support the
structure we have today,” Colbert says, but Boeing will
be better positioned for SaaS as it continues to simplify
its business processes.
As the number of SaaS applications in use grows,
managing integrations and data flows becomes a bigger
concern. “One of the
things we’re careful
about is understanding the integration
and what that does to
the overall profile of
our solutions,” says
Scott at Guardian. As
part of its governance
process, Guardian has
always had life-cycle
the software it builds
internally. Scott’s team
extended that to accommodate SaaS.
“Having this template to follow, which is
predictable, has proved
itself and is really one
of the secrets to our
success,” he says.
Some business applications in the cloud
aren’t up to enterprise
standards. “There are certain scenarios that aren’t there
yet,” Greene says. In some situations, the risk profile
doesn’t match the organization’s requirements. In others,
the business might need to wait until existing IT investments are fully amortized before investing in SaaS.
Even Guardian is still nibbling around the edges when
it comes to moving core ERP applications to the cloud,
and Gartner says cloud-based ERP implementations aren’t
nearly as common as cloud-based HR and CRM systems.
SaaS offerings for core ERP applications are still evolving. “One process I haven’t seen in maturity out there yet
is core financials,” says Greene. McKenzie also evaluated
financial service offerings but declined them. “The two
major products I looked at were not ready for prime time.
Honestly, the market is not mature enough,” she says.
Overall, IT executives say their experiences with SaaS
providers have been generally positive. “We haven’t had
one real problem, never a breach or had a vendor go away
or bad service or SLA breaches or had to sue anybody,”
McKenzie says. “Our experiences have been exception-
ally good — so good that we’re pushing more and more.”
These IT executives say SaaS didn’t win out in every
case. But Guardian chose that option in 20 instances
because the business case made sense and the ser-
vices were mature enough to meet the needs of a large
enterprise in areas such as service-level performance
and security. And Guardian had the clout to negotiate
favorable contract terms for service levels, limitation of
liability clauses, pricing and other requirements.
Every system that isn’t a competitive differentiator
should be delivered as a service, says Wander, warning
that “businesses that fail to pare their legacy architecture may find their core business disrupted by smaller,
nimbler companies who have built on SaaS and cloud.” u