Small and mid-size businesses considering their software-as-a-service (SaaS) options have more choices than ever. The latest vendor to enter the on-demand market is SAP, the German-based enterprise software powerhouse whose small-business SaaS product was introduced in late September. Called Business ByDesign, the multi-application suite should be widely available in the first quarter of 2008. SAP joins Microsoft and Oracle, who continue to roll out small-business SaaS products. They’re following Web-only SaaS pioneers like Salesforce.com and NetSuite Inc., which have built up strong user bases over the past few years.
When weighing which vendor to choose, size shouldn’t matter, industry analysts caution. Instead, businesses should consider the same things they’d consider when evaluating on-premise software: first and foremost, whether a vendor offers the product that best fits a company’s need and has a core competency in what they’re selling. Beyond that, they need to be committed to the SaaS delivery model, says Erin TenWolde, lead SaaS analyst at IDC, a Framingham, Mass., tech industry researcher. To assess that commitment, she suggests quizzing vendors on their future direction, profitability and customer base, and asking to talk to existing users.
Check contract terms
SaaS contracts vary substantially, so a business should check the fine print for terms that fit its unique situation. Typical terms cover:
- Contract length — Some vendors allow customers to pay on a month-to-month basis, so contracts could be terminated with a month’s notice, says Robert DeSisto, vice president and application strategies analyst at Gartner, a Stamford, Conn., technology researcher. Other vendors require a two-year commitment, not always a good thing. “If you subscribed for 100 users for two years and six months later laid off 50 people, you’d still be paying,” DeSisto says.
- New releases — Vendors give customers varying amounts of time to upgrade to new releases. Some make customers jump to a new release immediately, while others give up to three months.
- Outages — As with upgrades, vendors’ guarantees of uninterrupted service are all over the map. DeSisto says he’s seen everything from no uptime guarantees to vendors who promise 99.7 percent uptime.
Customization and customer service
In addition to contract terms, companies need to consider whether a vendors’ on-demand software can be customized to fit a special business need, and how much customer support is available. According to IDC analyst TenWolde, forward-thinking vendors such as Salesforce.com host idea exchanges on their corporate websites where customers and business partners can discuss best uses of the company’s software.
Good customer service is one way Web-only vendors are keeping customers now that bigger players have arrived. When Oriel Wines began using NetSuite’s accounting and finance software three years ago as a start-up wine distributor and reseller, there were no other options. Now that there are, Oriel managing director Kelly Ford wouldn’t consider switching, even though the New York City-based company has graduated to using on-demand applications for e-commerce and CRM. Says Ford: “We’re very happy.”
When choosing a vendor, it all comes down to fundamentals, says DeSisto, the Gartner analyst. “You still have to have the right product, sales force, and marketing. A lot of vendors are preoccupied with being labeled SaaS but aren’t doing the proper work behind the scenes to make themselves have a viable offering.”
