Phil Wainewright outlines a nice list of features to look for in a SaaS vendor. Let me suggest a few more:
Functionality - SaaS applications are where new client/server applications were in the early 90s. You will not find deep geographic, vertical or even horizontal features. PeopleSoft did not have decent manufacturing capabilities till the late 90s. It was marginally successful in Europe, and not make much of a dent at all in Asian markets. Oracle has only in last couple of years through its acquisitions been able to offer functionality for certain industries.
Of course, the majority of buyers DO NOT need those features. But don't write them off - we are in a very different market a decade later with more global businesses and more convergent industries. Get ready for a steady dose of FUD from the larger vendors about holes in SaaS offerings, and a bunch of promises from the SaaS vendors on future releases, partnerships, acquisitions etc.
TCO - SaaS pricing is deceptively attractive - all-in-one. Like taking a cruise. SaaS does negate need for separate server hardware or hosting. It reduces upgrade costs, as it does cost of bug fix/patch application, tuning and other maintenance and support done by internal IT staff. On the other hand, SaaS vendors will overstate the "low" cost of implementation. You still have to test, integrate, train users. Also, most SaaS vendors are positioning themselves as software plays, when they are really blending software and labor services. Their understanding of labor services and economics (their own and of their partner ecosystem) is still limited.
Back to license costs - if you shop around you find many different prices for the same suite on a given cruise. Same with SaaS licensing. SaaS is about to enter its own hype cycle and the advantage will shift to the bigger SaaS vendors. Let's not forget CEOs of both NetSuite and salesforce.com cut their teeth at Oracle. Good solid negotiation and TCO analysis is still called for.
Robustness of grid- particularly important for larger buyers. Insist on checking out the data center. Understand business continuity plans. Intrusion controls. Data privacy standards. Potential points of network and server failure and redundancy. Robustness of systems management technology. Ask for explanations of planned and unplanned outages in the last year. Understand future infrastructure upgrades and likely related disruptions. If infrastructure support if outsourced, ask for details and service levels.
Planned Investments - one of the biggest stress points for SaaS vendors and their investors will be around the significant capital needs of their grids. Wall Street did not like Microsoft's "surprise" earlier in the year. Investors are still learning the capital needs of the SaaS model. Your vendors need to be thinking about you as a buyer not just reacting to investor nervousness. They should looking at smart ways of lowering infrastructure cost, not avoiding the investments. Ask for and compare detailed capital investment plans from SaaS vendors. Also, there is a short distance between SaaS and BPO - ADP's acquisition of Employease is just one indication of that. Understand plans for expanding the services footprint and related people investments.
SaaS is entering en exciting period. Lots to commend about the model. But we have learned a lot from the last two decades of software and services procurements. Lots of overruns, delivery issues. Even more reason to conduct adequate diligence this time around.
