The SaaS Manifesto: Part 3 – Creating an “Express Lane” for the Procurement of Departmental SaaS Applications

In this final installment of the SaaS Manifesto, which has examined the rise of the departmental user as a major influencer of enterprise buying decisions, and how building a real sales team is integral to the process, the last critical consideration is the need to rethink the procurement process for SaaS.

The corporate one-size-fits-all process for procuring applications is broken. Many companies adopting SaaS are still using 85-page perpetual license agreements that were written years ago and designed for on-premise software purchases. It’s no wonder that SaaS companies want to avoid central IT and purchasing like the plague! Fortunately, the solution is simple: Every company needs to adopt a SaaS policy and treat SaaS software purchasing in an entirely different fashion from on-premise practices.

The perpetual license and SaaS don’t mix

Perpetual licenses made sense when companies invested millions of dollars for on-premise software, services and corresponding infrastructure. This resulted in procurement and legal teams requiring a slew of contractual terms including: indemnification and liability limits, future updates and releases, maintenance fees, perpetual use, termination and continued use, future software modules, infrastructure procurement, beta test criteria, deployment roll-out and many others.

The use of existing procurement practices makes no sense for SaaS and results in a sluggish and frustrating experience for everyone involved.  Frustrating for the departmental user who wants fast access to much needed business capability; frustrating to the procurement and legal groups who spend an inordinate amount of time negotiating useless terms; frustrating to the SaaS provider who is trying to go around the entire process; and frustrating to the CIO who fears rogue deployment of SaaS apps and their impact on security and compliance.

Like oil and water, the two practices don’t mix, and it’s time to change the game and create an effective three-way partnership between the user, the SaaS provider and the CIO.

Creating an “express lane” SaaS policy

CIOs can enable rapid adoption of SaaS by creating a repeatable, streamlined purchasing process that is significantly faster than a traditional approach. SaaS policies and procurement checklists should reflect this and CIOs can help key business stakeholders identify and map their requirements to the available SaaS offerings and ensure that appropriate due diligence is done.

A starting point should be the creation of different policies and procurement processes for mission-critical and departmental applications. Mission-critical applications still require 24×7 support, high availability Service Level Agreements, data security and disaster recovery considerations. Because these applications may directly impact revenue or customers, substantial up-front diligence is required. Nonetheless, many of the old, on-premise contract requirements are still irrelevant here since there is no infrastructure, no maintenance, no perpetuity, etc.

Aside from mission-critical SaaS apps, 80-90% of all SaaS solutions are departmental apps and these are the applications that should have an “express lane” for procurement. Imagine a streamlined process for most SaaS purchases that enables fast, easy and safe deployment. Everyone wins and everyone is thrilled at the result.

The Express Lane checklist for departmental apps

The following checklist is a framework for establishing the Express Lane:

  • Data ownership and management – Clearly define that all data is owned by the company, not the SaaS provider, and can be pulled out of the providers system at any time.
  • Security – the ability to control the level of access by the SaaS provider and the company’s employees, as well as shut off access when an employee leaves the company.
  • Dedicated support and escalation path – Access to a fully staffed support team, but probably does not need to be 24×7.
  • Reliability – Set a baseline for the provider’s historical reliability, including lack of downtime and data loss.
  • Disaster recovery processes – Internal plan to minimize information loss if the vendor goes out of business or violates the user contract.

Applying a framework creates a partnership with all stakeholders and has the following benefits:

  • Cost savings – Save money in terms of company resources needed to take providers through approval process and in up-front overhead on long-term contract commitments.
  • Scalability – Ability to use a SaaS solution for a specific segment of a business or across an entire enterprise.
  • Efficiency – Streamlined process with legal and billing.
  • Flexibility – A month-to-month contract, instead of a SLA, means a company is not locked into a long-term contract.
  • Eliminates rogue solutions – IT gains greater control by eliminating the practice of employees signing up for services on their personal credit cards and expensing.

Ending the use of perpetual license practices for SaaS applications will result in much better alignment between the SaaS supplier, the internal user and the CIO. And the creation of an Express Lane for the vast majority of all departmental apps will enable rapid adoption of business applications by the departmental user, while giving IT the oversight in the rapidly evolving world of SaaS.

The SaaS revolution has not only changed the way products are delivered and developed, but the way products are brought to market. SaaS and the departmentalization of IT recognize that the line-of-business buyer and new sales approaches target that buyer with a combination of freemium and inside sales. Couple this with a streamlined process for procuring SaaS and we create the perfect storm for a massive transformation in application deployment and productivity.

Note: Part 3 of “The SaaS Manifesto” first ran in The Wall Street Journal‘s CIO Journal.

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