How to choose a SaaS provider: Key questions you should ask yourself

11 min read

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According to BetterCloud, a SaaS Operation Management platform, in 2017 companies used an average of 16 Software as a Service (SaaS) apps, 33 percent up from 2016, and 73 percent of organizations say nearly all their apps will be SaaS by 2020.

The emergence of a new type of workplace has tremendous benefits. This so-called SaaS-powered workplace cuts costs, bolsters communication and improves employee satisfaction, to name a few.

But it also introduces new challenges for IT. To overcome these challenges and adapt to this new SaaS-powered enterprise, proper planning and training is paramount. Organizations need to rethink roles, responsibilities, budgets and processes. To help you in your journey to become a fully SaaS-powered company, we have created this guide with a short introduction to SaaS and the key questions you should answer before choosing a vendor.

What is SaaS really?

Software as a service is an application distribution model where the software is hosted, maintained and updated by a third-party provider on their own servers and made available to organizations or individuals to be used over the internet.

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What are some examples of SaaS?

Nearly every software that runs in your browser and is targeted towards the end user can be categorized as a Software as a Service product. The spectrum includes nearly every software category except for resource intensive applications that need instant graphical feedback for the user like professional photo editing applications or high-end 3D software or those applications that inherently rely on local execution like disk-checking tools. SaaS categories include but are not limited to:

  • Office applications (Spreadsheet editing and word processing) like Microsoft’s Office 365 and Google Docs and Sheets.
  • Email client applications like Gmail and Microsoft’s Webmail (part of Office 365).
  • File storage and sharing applications like Google Drive, Microsoft’s OneDrive, Dropbox and more.
  • Accounting software like Zoho and Xero.
  • Customer Relationship Management (CRM) software like Salesforce and Bitrix24.
  • Highly customized management software for niche applications like OpenClinica for optimizing clinical trial workflow, Tekmetric for managing auto repair shops, or Basil for bookstores.
  • Customer support and ticketing software like Zendesk and Freshdesk

What are the benefits of SaaS?

SaaS’ distribution and business model frees organizations of the burden of hardware and software license acquisitions. It also removes the need for updating and maintaining the software and enables organizations to keep their IT department small. In a nutshell, the SaaS model has the following advantages and benefits:

  • Low barrier to entry: The Software as a Service model enables you to “rent” an application as you use it removing the high hardware and software acquisition costs that are part of the self-hosted software model. In addition, since the application’s software and hardware are maintained and updated by a third party, the need for IT personnel is minimized or removed completely.
  • Flexible payments: Different licensing models geared toward every business model and size give you better budget planning options. The pay-as-you-go model that is intrinsic to most SaaS products allows you to keep your operational expenses in proportion with your business’ positive or negative growth.
  • Scalability: SaaS being cloud application by nature are easily scaled up or down with minimal costs. When your business grows you don’t have to worry much about expensive acquisitions of hardware and the skills to implement it. This feature also works the other way around. At low usage times when your business shrinks due to a general recession in the market or just a seasonal tide, you won’t have to worry about useless hardware sitting in your server room losing value.

Are there any disadvantages in moving to the SaaS model?

Like its benefits, the main disadvantages in the SaaS model lie in the fact that the service is provided by a third party. Any data breaches, disruption in service availability or even unwanted software updates are things that could affect your business. In some cases where high security standards are required, third-party Software as a Service providers aren’t an option and you must consider on-premise solutions.

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Differences between the legacy software model and SaaS, PaaS, and IaaS model

What is the difference between SaaS, PaaS, and IaaS?

Software as a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS) are just the three different layers of the cloud computing stack model from top to the bottom. SaaS—the software layer—sits on top of PaaS—the platform layer—and offers the software as a service to the end user, usually through to a web browser.

The platform layer (PaaS), is rarely used by business people and is geared toward developers. In essence, it enables them to build new software and features faster without the hassle of bothering about the infrastructure. Common examples of PaaS are Google App Engine and Red Hat’s OpenShift.

Further down the stack of cloud computing lies Infrastructure as a service—the bottom most foundational layer. At this layer, storage, network capacity and computing power are offered as a service. Amazon Web Services (AWS) and Google Compute Engine (GCE) are common examples of this category. Please keep in mind that while cloud computing services mature, these distinctions can blur in many cases. For example, Salesforce can both be interpreted as Software as a Service and Platform as a Service at the same time, depending on your application and angle of view.

Key questions you should ask yourself before choosing a SaaS provider

Now that we’ve covered the basics, let’s dive into the key questions every company and organization should ask themselves before opting for a Software as a Service provider:

1. Why are you choosing a SaaS service?

This is a basic question, but also the most fundamental one you should ask yourself. The next questions and implementation stages in your quest to move your business to a SaaS provider vitally depend on it.

Whether you choose the SaaS model to get rid of the software and infrastructure maintenance to focus more on your business workflow or just want to ease collaboration of geographically remote departments through SaaS—write down exactly the benefits you envision to get from the Software as a Service model.

Be concrete about the parts of your business and workflow that you move to the SaaS and the parts that you intend to keep as before. Separate your requirements into a must-have and nice-to-have column and try to be as definite as possible. Also make sure you know your current environment well enough to include possible integration requirements in your considerations.

2. Is the product a real SaaS?

There are many hybrid solutions that are advertised as complete SaaS products. Be aware of that and choose them with open eyes with regard to their limitations if you like to. Real SaaS solutions usually just need a browser to run, everything else is in the cloud and you shouldn’t worry about.

If the solution asks you to install special client software on your end users’ computers or needs you to keep parts of the application on-premise, think twice before committing to it. There are also so-called “SaaS” solutions where you need to cobble a few products together. In all these cases you could end up paying more for updating or subscribing to all the services.

3. Does the SaaS fit into your current and future user environments?

For a SaaS product that should just run in a web browser, this may seem an odd question, but web veterans can tell you one or two stories about how the hotchpotch of technologies that web based applications build on got them stuck with one or two of the famous browsers. There are incompatibilities with mainly older browsers especially Microsoft’s Internet Explorer. Nowadays, Google Chrome is arguably the de facto standard for web applications. But be aware that there can be subtle differences in functionality and visuals from browser to browser. A common example these days is how Google Docs prompts you to use shortcut keys when you try to copy and paste something through the right click context menu in Firefox. (I’ll be damned if there isn’t some sort of competition going on between the Mozilla Foundation and Google over standards and market share.)

In addition, think about mobility. If you have employees who need to access your SaaS product on the move like in warehouses or shipping service drivers, make sure that your SaaS provider offers Android and iOS apps. Check the functionality of those apps thoroughly since the interface could quite differ from the web interface of the SaaS product and hide a few nasty surprises.

Having a responsive design is also a necessity these days if you intend to use the SaaS product on devices with different screen size.

4. What are the exit options the SaaS provider offers?

Thinking about how to cut with a SaaS provider before even starting the relationship may seem odd, but in the fast-evolving space of the internet it is a must-have feature. Companies get acquired, change strategy or simply go bankrupt. If you intend to build parts of your business workflow on a SaaS product that is by nature out of your control, you should explore your exit options. In short, never choose a SaaS provider that locks you in without any exit routes.

Look whether they enable you to export all your data, including user account information, customization, etc. in a standard format. Or maybe they have migration options with de facto standard products of your category. Some SaaS products are also open-source software that you can set up and host on premise.

If the SaaS provider promises to export the data for you in case you want to leave, make sure you write that down in your contract as attitudes can change in times of divorce. Also keep in mind that some providers tend to keep at least parts of your data for a certain period of time. If that’s in violation of your data policies make sure to request them to erase all your data from their servers.

5. What are the SaaS company’s support and help procedures?

The best way to assess a vendor’s support and help quality is by trial. When selling, every company—SaaS vendors included—provide “first class” support. But when you become a “locked-in” and paying customer, the story can turn upside down.

Create a trial account and fill support tickets to see how they respond. Do not associate the trial account with your company as this could bring preferred support. Creating even a real, paying account just to test the service for a few weeks doesn’t hurt, considering the later investment you intend to make in the product.

Ask about the help procedures. Whether your users are directly connected to the SaaS vendor’s help desk or your in-house support team needs to solve Tier 1 tickets and escalate the rest to them.

6. How does the SaaS product integrate with other software and services?

Our workflows rarely fit into a single software and one of the major drives for moving to the cloud is to have better integration options. Most reputable and mature SaaS providers offer great APIs and integrations with common productivity and office applications. Be sure to study your chosen provider’s integration options carefully and take all your requirements into account. This is where a good understanding of your current environment and applications will help you greatly. Also think about the skills that are needed to implement those integrations. Are they just drag and drop or one-click good-to-go options or do you need to hire developers? Does the SaaS vendor cover the implementation? What are the costs?

7. What is the Service Level Agreement (SLA) the SaaS provider offers?

The Service Level Agreement (SLA) is where the SaaS provider clearly states what services the client will receive. It defines the measurable aspects of the promised service in terms of things like quality and availability. It also clearly states the consequences of failing to live up to the promised standards. Even small outage times can lead to severe consequences for a business. Customers lost to the competition; bad reviews showing up on social media and even vital data losses can happen.

Be sure you have covered every possible misunderstanding in the SLA. For instance, your business may be located in another part of the world rendering the SaaS provider’s standard guarantee of availability within business hours useless. Or you may have a 24/7 business and availability within business hours is not enough.

When you’re moving your business to the cloud, make sure you are happy with the SLA of the SaaS vendor. Make sure that the SLA covers the consequences of where the SaaS service provider fails to live up to their commitments. These consequences must be roughly equal in value to your losses.

8. What are the IT support requirements for keeping the service functioning smooth and available?

Before going full force for a SaaS service vendor consider the possible change in IT support requirements. This essentially depends on 3 factors:

  •     The support and services the SaaS vendor offers.
  •     How clearly and thoroughly the SaaS documentation is written.
  •     How easy your requirements can be achieved with the SaaS interface, tools, APIs and model.

One of the main advantages of the SaaS model is to reduce maintenance costs. But implementing new technologies can require skills that your current IT personnel don’t have. The packages of all SaaS vendors aren’t the same. While one will happily guide you through the process, others may just provide their services and expect your IT personnel to be “geniuses.” Make sure that your expectations and those of the SaaS provider are the same before going into any contract and plan ahead for decreasing or even increasing your IT workforce.

9. Consider how a contingency plan would work in case of SaaS provider service failure.

We have already covered the Service Level Agreement with the SaaS vendor where the quality you are entitled to receive and the compensations for failing to do so are clearly defined. But if you intend to run a vital operation to your business with this vendor, it may not be enough. Plan ahead for a worst-case scenario where the SaaS vendor goes out of service for a longer period of time. If you can accept that and get the compensation for the SLA violation, that’s OK. But if not, have contingency plans to keep your business running—even with a low profile—in case of a failure

10. Are your employees adequately trained and what training options does the SaaS service provider offer?

The fact that implementing SaaS is much easier than traditional software can increase the chances of neglecting proper employee training. Many SaaS providers offer training programs for new customers. There are also third-party companies that partner with SaaS providers and specialize in training and implementing new SaaS instances. Plan carefully for your employees’ training. Eventually the adoption rate of the new software is what counts and your employees are at the forefront and vital to the project’s success.

11. What migration options does the SaaS provider offer?

Importing your old data into the new system can become a time-consuming and expensive process. Different data formats and structures are typical hurdles you must overcome in application data migration. Mature SaaS vendors usually have already developed the proper mappings to import data from well-known applications and formats. Be sure to inquire about that and take it into account when choosing your SaaS service vendor.

12. What backup plans do they provide?

It’s crucial to have a bulletproof backup plan to guarantee data integrity and prevent data loss. Many times, SaaS providers rely solely on their infrastructure provider’s backup strategy. While industry heavyweights like Amazon and Microsoft Azure have robust redundancy plans, make sure your SaaS provider has its own backup plan to counter possible human error or service outage. You can also ask them to provide you an interface to create your own backups.

13. What is the pricing model? Are there any hidden fees?

With the traditional software model everything is straightforward. You pay a huge amount of upfront costs for hardware and software licenses and that’s it. Usually the overall costs only depend on how many systems you intend to deploy.

SaaS isn’t that simple. Beware of hidden costs. In some cases, the costs are not fixed but vary based on different factors including user count, API hits, bandwidth usage, etc. If the pricing seems to be too good to be true or the SaaS provider’s sales team seems to pass over it too fast and happy, bring in your legal team and specialists to go through the SaaS service’s fine print to discover and address these hidden and probably later costly limitations.

14. What is the maturity vs. functionality balance of the SaaS?

As with every technology, you can very fast become all too excited about the new functionality, flashy design and promise of automation and integration that the SaaS software promises. But beware that often times, it’s the least mature players in the market that bring you the latest technologies. These are individuals or teams that are very innovative and tech-savvy but don’t have the experience and funding to sustain their presence. These companies could lack proper support and documentation or go out of business due to their risky business model.

At the end of the day, everything depends on your own business model and whether it is worth taking the risks to get the advantages. So, understand the risks and rewards before you commit yourself to a SaaS service provider.

15. How does the innovation and update process of the SaaS company work?

As mentioned before, in the SaaS model your software and hardware are maintained and updated by a third party freeing you from all the hassle and costs that come with it. But you also lose control.

What if you don’t want your software to be updated and are happy with the old version? What if the update cycles are too fast and the overhead of new training and adoption just keeps you from doing your main business? Does the SaaS company give you the option to keep the old version of the software or forces it upon you? You should be clear about the innovation and update process of the SaaS vendor and come to a reasonable agreement with the vendor before striking a deal.

Final thoughts

Over the past two decades Software as a Service have become so widespread that some are suggesting to drop the term altogether and refer to SaaS as just software. History has shown that when a technology becomes mainstream enough we just take it for granted and don’t mention it again. So often we don’t say “electric” blah—just blah. That’s because every blah in this country is already electric and legacy non-electric ones are the exception.

The same semantics is gradually penetrating the linguistics surrounding cloud software and SaaS because total silo applications are the exception. Even software that cannot be moved to the cloud have become hybrid in most cases where some of their functionality is cloud based. Since a few years, there are professional graphics applications that while installed locally are offered and activated on a month to month basis, practically making them services.

Back in 2015, Salesforce had to drop its “No Software” tagline. The company had to explain that “No Software” actually means “No legacy software, just cloud software.”

So, the question is not whether you start using SaaS in your business and move more and more to the cloud but how cleverly and efficiently you do it. And that depends on how meticulously you plan ahead to take advantage of the cloud while minimizing its usual drawbacks and disadvantages.

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