SaaS

Navigating your SaaS contract: Buyer beware?

Even as CIOs face smaller IT budgets in a range of areas this year, one segment that still has traction is Software as a Service (SaaS). The subscription-based software delivery model provides an alternative to bulky, on-premise applications and is thriving in shops where CIOs need to deliver functionality quickly without a lot of up-front investment.

But buyer beware: The gold on the road to SaaS is often buried in the contract you negotiate, and some CIOs are left wishing they had done something differently soon after the ink has dried.

In a recent SearchCIO-Midmarket.com article, CIOs shared tips and advice for avoiding potential pitfalls in SaaS contracts, from contract duration to licensing fees and more. One CIO faced a requirement to buy a minimum number of licenses, which had to be maintained for the life of the contract. Adam Sokolic, vice president of product management at National Retirement Partners Inc. in San Juan Capistrano, Calif., lost 15 people in a layoff and was stuck paying for the licenses even though he didn’t need them anymore.

Ouch.

Such issues don’t seem to be crimping the popularity of some SaaS solutions, though. Research firm IDC has increased its SaaS growth projection for 2009 from 36% growth to 40.5% growth over 2008.

Service-now.com recently announced record growth of almost $20 million in recurring revenue by the end of 2008, bringing fiscal year revenue growth to 389% of 2007. Salesforce.com saw a 34% jump in quarterly revenue by the end of January, reaching a record quarterly revenue of $290 million. Subscription and support revenues were $266 million, an increase of 35% over last year, and professional services and other revenues were $23.5 million, an increase of 15% over 2007. In fact, as these results show, CRM and IT Service Management software seem to be among the more popular application categories for SaaS.

So while lobbying for desirable SaaS contract terms may require a practiced and skilled negotiator, the market growth shows that SaaS continues to gather steam in today’s corporate IT. And that can benefit everyone.

Google on cloud computing and Enterprise 2.0

Oh, so we went to the Enterprise 2.0 Conference in Boston about three weeks ago and interviewed Rishi Chandra, a product manager with Google’s enterprise division.

What follows below is a half-hour of raw interview footage covering Enterprise 2.0 in general and Chandra’s thoughts on cloud computing specifically. So a lot of it is out of context, but we think it’s really worth watching.

And this isn’t even the royal ‘we’: Interviewers are myself, WhatIs.com’s Alex Howard and Barney Beal from the TechTarget Enterprise Applications Media Group. If it’s a really good question, you’re hearing Alex. If it’s meandering, you’re hearing me.

Google Health: A test run

Google Health is up, and it is getting a LOT of press this week.

I wrote last month for the site about the challenges this and other on-demand personal health record programs will present for hospital CIOs. And since then, I’ve been dying to at least get a look at it.

Some thoughts:

Continued »

Design Flaws?

The folks over at the SearchSAP.com blog are reporting that SAP has delayed its Business ByDesign rollout. Apparently, there are some bugs to be worked out in the on-demand ERP program, which is still less than a year old.

The delays could push as far as late 2009, according to German news source Handelsblatt. What’s not really clear right now is where it is delayed. The service, aimed at midmarket companies, is currently available in the U.S. though it has been a slow climb in user adoption for SAP. To be fair, the thing is still less than a year old.

Will SAP CEO Henning Kagermann hit his 10,000 users by 2010 promise? It was already looking like a tough road and now the spring potholes are starting to show up.

I’ll be in Orlando next week for Sapphire, SAP’s big annual conference. So hopefully I can learn a bit more down there. There’s even a free Eric Clapton show for attendees, though I won’t be attending. I prefer my rock without a layer of extra-thick smugness.

SaaS: Probably worth a look, despite the overwrought pitches

Not more than 48 hours seems to go by here without another press release on some new Software as a Service (SaaS) offering that promises to make life a heck of a lot easier for midmarket CIOs. As a reporter, I’m a bit skeptical of just about anything that comes via a public relations firm. It doesn’t help that the pitches, both on paper and in person, include words like solution. As in, “The new solution from company X will help midmarket IT departments…” 

Yeah, I get it. By using the word solution, you imply that this product is the only fix for an otherwise unbeatable problem. Thing is, if I understand why they’re using that word, the purpose of using the word is defeated. A magician whose tricks are exposed isn’t a magician. He’s just a hack with a cape and saw. All that said, the recurring line that SaaS products cut down on installation costs, infrastructure and staff time does make sense. SaaS folks, with a little prodding, will generally admit that these products do limit customization. But for a smaller midmarket shop, that may not be a problem. It may even be a blessing, helping to restrain the urge to customize something into an overdetailed, unusable mess. 

And it does appear that CIOs want this stuff. I spent some time on the phone last week with George Jaquette, vice president of product management at Intacct, which makes a financial management SaaS. The spring 2008 version of the product doesn’t bring anything astounding to the table. Talking with Jaquette, I left with the impression that this was a competent product that probably does exactly what it is supposed to do. He did hit pretty hard on the fact that Intaact has two backup centers, in San Jose and
Philadelphia. That seemed meant to soothe any concerns about having important data stored on someone else’s servers. 

But here’s the part of the conversation where I really became interested: Jaquette says 70 percent of the company’s current customers have signed on in the last year. Self-promotion, yes. Manipulation of data? Possibly. But I doubt the guy would straight-up lie. I’m ready to take SaaS at face value. The concept has gone beyond trend, and although the market seems flooded with soon-to-be also-rans, some real leaders will emerge to match the few that already have, like Salesforce.com. We’ll continue to report on this and will even produce a SaaS All-in-One Guide in the coming months that will package all the relevant information potential SaaS buyers will need.