The Enterprise and SaaS: A Mismatch Made in Heaven

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?

About the author

Stanton helps enterprise IT and sourcing leaders rationalize and capitalize on emerging technology opportunities in the context of the global sourcing industry. He brings extensive knowledge of today’s cloud and automation ecosystems, as well as other disruptive trends that are helping to shape and disrupt the business computing landscape. Stanton has been with ISG for more over a decade. During his tenure he has helped clients develop, negotiate and implement cloud infrastructure sourcing strategies, evaluate and select software-as-a-service platforms, identify and implement best-in-class service brokerage models, and assess how the emerging cloud master architecture can be leveraged for competitive advantage. Stanton has also guided a number of leading service providers in the development of next-generation cloud strategies. Stanton is a recognized industry expert, and has been quoted in CIO, Forbes and The Times of London. You can follow Stanton on Twitter: @stantonmjones.