Six tips for negotiating contracts with SaaS vendors

March 5, 2013, 6:00 AM PST

Takeaway: Mary Shacklett offers six important tips that should inform your decision-making when it comes to engaging a SaaS vendor.

The software as a service (SaaS) market will top $15 billion this year . SaaS has been a boon to many companies, because it allows them to off-load some of the applications in their IT portfolios to third parties with specialized expertise. Organizations are clearly finding value in SaaS, and are embracing it. However, this doesn’t mean that their relationships with SaaS providers couldn’t be even more beneficial.

How you begin your relationship with your SaaS provider is one very important key. Often, this comes down to an effective contract negotiation that is fair to all parties, with an understanding of expectations on all sides.

Before you sign on any dotted lines with a SaaS provider, here are six contract negotiation tips that you should strongly consider:

#1 Does the SaaS provider have SAS70 and IT audit reports?

Performing a SAS70 audit is very expensive. It is also why many SaaS organizations don’t do them. Most SaaS companies do execute IT audits. When you are interviewing prospective SaaS vendors, request (and expect) copies of these audits. You should also ask for a financial report so you can evaluate the vendor’s long-term financial solvency.

#2 Does the SaaS provider have published SLAs?

It might come as a surprise that many SaaS vendors have internal SLAs (service level agreements)-but few SLAs that they publish externally to clients in contracts! If you want the vendor to promise SLAs that meet the internal performance expectations that you have for yourself, be sure to write these SLAs into the contract with your vendor.

#3 Do you have a dedicated project manager?

Very often, IT vendors (including SaaS providers) put their best people on your initial service implementation-and then reassign someone with less skills after cutover. In contract negotiations, it is smart to write in a provision that gives you the opportunity to interview and preapprove any person who is going to be the vendor’s primary contact with you. SaaS projects can be made or broken with the quality of the primary contact points between your organization and the SaaS provider, because all communication and coordination flow through these points.

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