Enterprise demand for SaaS is surging. Providers are building, acquiring and partnering on SaaS platforms at a breakneck pace. What happens when they meet?
Paul Schmidt and I had the opportunity to present at the ISG Sourcing Industry Conference last month on trends in enterprise software-as-a-service. The primary focus: the intersection between a client’s expectations and the realities of contracting for SaaS.
After a brief discussion about the state of the market, we focused in on the intersection between buyers and sellers in three key areas:
- Financial: SaaS vendors market the “pay-as-you-go” mantra, while in reality many SaaS contracts include significant up-front investments and long-term commitments.
- Contractual: Given the size of many SaaS transactions, clients expect to negotiate these contracts like an outsourcing arrangement. SaaS vendors bring highly standardized agreements to the table.
- Operational: Although SaaS vendors are very good at creating a user-friendly “black box” for business buyers, the lack of visibility into the operations of the platform creates significant challenges for IT, security and compliance teams.
We wrapped up our discussion with some recommendations to providers:
- Be open and transparent early in the sales process. It’s better to tackle these issues early than to wait until late in the contracting process; delaying the conversation can create mistrust and animosity from the buyer, oftentimes leading to stalled pursuits.
- Focus on the real pain points of the key influencer. For example, many CIOs have not considered the fact that by using a SaaS delivery model instead of on-premises, they are buying a modern application that will stay modern. Given that well more than 50 percent of IT budgets continue to focus on maintenance of existing systems, the “always modern” approach to SaaS can be quite compelling.
I’m interested in what you think. Do you agree that there is a mismatch?0