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SaaS Adoption: Before You Sign on the Dotted Line | @CloudExpo #API #SaaS #Cloud

The attraction of SaaS offerings for businesses include advantages such as speed of delivery, scalability, and low cost of entry

The purpose of this article is draw attention to key SaaS services that are commonly overlooked during contact signing that are essential to ensuring they meet the expectations and requirements of the organization and provide guidance and recommendations for process and controls necessary for achieving quality SaaS contractual agreements.

The attraction of Software as a Service (SaaS) offerings for businesses include advantages such as speed of delivery, scalability, low cost of entry, accessibility, and lower costs to just name a few. But one can't deny another aspect of SaaS adoption which is the "selling" aspect of such solutions. SaaS providers want their customers to feel that not only do they have the best solution, but they have your best interest in mind and will take care of everything for you. They will often pitch their solution services as complete and comprehensive to their customer's needs. But is it necessarily true in all cases? Just like leasing a home or an automobile, it's extremely important to understand the services provided and if those services match the needs and requirements of your business. There are some basic common areas in which key services should be understood and, if needed, be negotiated with the provider to ensure you're provided the best services possible. Don't assume that because other customers agreed to the provider's standard agreement, that it also meets the needs of your business.

Hosting Arrangement and Third Parties
Not all SaaS solutions are developed, integrated, supported and hosted the same. In order to understand and evaluate potential risks, such as the SaaS Provider becoming insolvent and going out of business, it's important to understand the hosting arrangement and identify all parties involved. Here are some things to ask:

  • Is the solution single tenant, multi-tenant, or on its own hardware?
  • Does the SaaS provider host their solution or utilize a third party such as Amazon and Microsoft Azure?
  • Will the solution be implemented or supported by a third party?
  • Are there third-party products or services required for the solution to operate?

Understanding the Data
Data is the critical part of a SaaS solution. Before the contract is signed, the data formats and even the data relationships of the solution should be well understood. This becomes even more essential if the SaaS solution is expecting data imports from legacy or integrated systems. Once understood a data strategy will often need to be in place. But without understanding the work involved in conversion, the budget and resources may not be adequate for the project. As early as the Request for Proposal (RFP) stage, all potential SaaS providers should supply data format and relationship information.

It's common for a SaaS Provider to only provide a production environment and use of a common sand-box environment. This proves to be insufficient because the customer has no control as to who makes changes to this environment in terms of configuration and data refreshes. In most cases at least two environments (production and non-production) environments are necessary, so there's an opportunity to test out any configuration changes before going into production. Here are some other examples as to the requirement for additional environments:

  • A development environment could be needed to test complex system integrations or custom development.
  • A training environment with the specific company configuration is required.

True System Availability
SaaS providers will give a percentage (such as 99.9%) of guaranteed uptime / system availability and if for a given month that is not met, a credit is due back to the customer. SaaS agreements define uptime / system availability in a variety of ways. The trick is to step back and fully understand all the possible ways the system could be unavailable on a monthly basis. There are usually two main kinds of unavailability that are planned and unplanned. One of the more common unplanned calculations is as follows.

Uptime Calculation:

((Users Minutes - Downtime) / User Minutes) x 100 = Uptime %

In addition to the promised uptime from the SaaS provider there's also a section in the agreement for planned maintenance. The window of the planned maintenance varies greatly depending on the provider and solution. It could be one hour a month or it could be eight hours per week. What's extremely important to point out here is that in most cases the provider will not include planned maintenance in this calculation for the promised uptime. Therefore the true uptime / system availability promised by the provider is much less given that they could use the entire planned maintenance window and not have to provide any service credits. This may or may not be acceptable based on when the solution is expected to be used, but it's important to understand all aspects of when the solution may not be available.

Time Zones for Service Support
It's important to be aware of the time zones indicated in the agreement in terms of Support Center availability. Your organization could be located in the Eastern Standard Time zone while the SaaS provider's support center is located in the Pacific Standard Time zone where there's a three hour difference. This can be an issue when employees come in at 8 am EST on Monday only to find the solution is not working and the provider's support center is not open until 8 am PST.

Security Breaches and Reporting
The SaaS contract should define the procedure in which pProvider informs your organization when a security breach occurs including how your organization should be contacted and the actions to be taken. In addition, there should be language that by request they should provide any penetration testing reports and proof of on-going security certifications standards (ISO27001, SSAE16, etc.).

Incident Resolution
Expectations as to how incidents are handled should be well defined. Here are some areas to consider:

  • Quicker response for critical and high incidents
  • Escalation of high priority incidents. For example if a high priority incident isn't resolved in two days it becomes a critical incident.
  • The specific method of how your organization should be contacted when these incidents occur.
  • How quickly the vendor should communicate the incident and the expectation of when it will be resolved. Failure to do so would lead to a service credit.

Service Level Credits
What good is a system uptime guarantee of 99.9% if there's no defined compensation when service levels are not met?

  • Define what areas of the service need to be measured (performance, availability, incidents, etc.). Note that in order for this to be effective, there must be a non-subjective way to gather information to measure whether service levels are being met.
  • Make sure your credit structures are well defined in terms of when a credit would occur.
  • Make sure that the contract spells out when (quarterly or annually) and how service levels will be applied (credit or cash back).

Service Renewal
Beware of rate hikes! Many SaaS providers will put in high increases once the term is over. Here are some suggestions to help reduce the high expense impact on renewal:

  • Limit the increase in fee to 3% or an industry standard price index.
  • You may also want to look for a longer term contract up-front (five years instead of three, etc.)
  • Make sure you include a clause that even if the product name changes or gets bundled you pay the same fee.

Return of Company Data
Though the focus when adopting a SaaS solution is getting it up and running, it's important to know how you will handle the data once the relationship with the provider comes to an end. Here are the things to keep in mind:

  1. Data Format: Many SaaS providers will tell you that they will give you the data in the format they select or refer to a standard format. Make sure you negotiate the specific format in the agreement or state that you need to agree upon a format.
  2. Data Definitions: Make sure the provider includes the data definitions of the data they give you. What good is a blob of data if you don't understand it and how to parse out the information?
  3. Data Completeness: Make sure the data given back to you includes any custom scripts and APIs. You want all the custom data that is specific to your organization as it will also include business rules.
  4. Data Expiration: Make sure the provider holds the data for enough time so it can be sent back to you.
  5. Data Return Request: Many SaaS providers will return data only upon request, so make sure you have enough time and understand that you have to initiate the request.
  6. Cost: Beware that some providers will charge for the return of your data so make sure that this is negotiated upfront in the agreement.

In addition, be aware that some providers get rid of the data as little as one week after the end of the contract (usually 30 days). Make sure the time-frame meets your expectations.

In addition to the guidance provided, the following recommendations are encouraged:

Hosted Services Requirements Document
Work with your procurement, security, IT architecture, and legal teams to develop a Hosted Services Requirements document outlining service expectations for the SaaS provider. The document should be used as part of the contractual agreement. If the SaaS provider would rather utilize their own agreement, the Hosted Services Requirements document can then be used as a guideline to compare what your organization wants and what the provider is proposing.

The Hosted Services Requirements document will consist of legal, security, and service related items such as (just some examples):

System Availability

System Performance

Incident Management


Disaster Recovery



Infringement Indemnity

Service Renewal

Data Ownership

Data Storage

Data Retention & Return

Data Protection


Service Level Credits


Dispute Resolution

Software Escrow


Acceptance Period

Compliance & Laws

Develop Standard SaaS Questions for RFI / RFP
Though not all SaaS solutions are alike, there are still basic questions you will want to know about the solution from a support, implementation, pricing, and hosting arrangement perspective. In order to measure provider risks and evaluate solutions in a common manner, standard questions become very important.

Institute A SaaS Agreement Review Process
SaaS service agreements and contractual documents should be looked at carefully from various points of view. Such as:

  1. Legal - Is there enough protections to minimize risk?
  2. Procurement - Are the pricing terms and renewal rates acceptable?
  3. IT Architecture - Does the solution meet our Enterprise IT standards and strategy?
  4. IT Security - Does the offering provide adequate security protections based on the type of information being used and how it's utilized?
  5. Solution Owner - Does the solution provide the services necessary for the community using this solution?
  6. Accounting- What part of this solution can we capitalize and what is expense?

More Stories By Ed Witkovic

Ed Witkovic is an IT Solutions Architect at Eversource based in Berlin, Connecticut. His 20+ years of diverse expertise includes leading development and integration teams, Manager and Director of IT Key Account Management for Henkel, and now currently focused on Cloud Adoption in regards to IT Processes, Roadmaps, Solution Design, Strategy, and Solution Assessments.

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