Computerworld has an post "Top 10 SaaS Traps", which highlights the areas that customers need to watch out for when engaging with an SaaS vendor, also while reading the article it occured to me that SaaS vendors can position them selves as the solution for the Heat, Space & Staffing problems that the IT dept's data centers are having.The article also cautions about the different costs that come into play for a SaaS application, Which include setup costs, training fewws, sotrage limits & integration costs. It than goes on to highlight the 10 areas to watch out with an SaaS vendor.

Excerpts from the article:

In theory, software as a service (SaaS) should be a cost-effective option for IT executives who don't want to deal with the hassle and expense of installing and supporting software for users.So SaaS is cheaper than installing your own software, right? Don't count on it. "If you go into a SaaS agreement believing it's going to be less expensive under all circumstances, you should reorient your thinking," says Rob DeSisto, an analyst at Gartner Inc. There are all kinds of extraneous expenses that SaaS customers need to be aware of, according to DeSisto. Those include setup costs, training fees, storage limits and the costs of integrating with other applications.

Here are the top 10 gotchas in SaaS agreements that corporate customers should watch out for:

1) "I agree" to what? SaaS providers typically send electronic contract notifications to customers with an "I agree" button for them to click, says Pat Cicala, president and CEO of Cicala & Associates LLC, a consulting firm in Hoboken, N.J. IT organizations that are poorly governed or don't have a centralized Web licensing strategy run a significant risk of having business leaders agreeing to software terms they're not familiar with.

2) Easy installment plans. For customers, one attractive characteristic of SaaS agreements is that they don't require a huge upfront financial commitment to start a service. But even though there are advantages to paying for the service on a monthly or quarterly basis, few customers realize that they can pare their yearly costs by 5% to 15% if they pay for an annual SaaS agreement all at once, says Michael Mankowski, senior vice president of Tier 1 Research in Minneapolis.

3) Missing SLAs. Service-level agreements, such as those guaranteeing vendor response time, are a critical component of SaaS contracts, says Mankowski. Some vendors provide SLAs with the contract, while others charge extra fees for SLAs or don't provide them at all, he says. "If it's a business-critical application and you need five 9s uptime, you need to make sure that's covered in the agreement with your SaaS provider," Mankowski says.

4) Performance levels. Customers should clearly define software uptime and availability levels with SaaS providers in writing. Before entering into an agreement with a SaaS provider, customers should ask the vendor for a record of past performance levels, says Kaplan.

5) Defining uptime. SaaS customers need to carefully define guarantees around system uptime, says DeSisto.

6) Add-on costs. SaaS customers should scour the fine print for hidden expenses. Sometimes vendors charge to configure the software or implement the database or workflow processes, says DeSisto.

7) Integration intangibles. If SaaS software has to be integrated with other customer systems, buyers need to determine who's responsible for handling the systems integration and at what cost, Scott says.

8) Data rights. Before entering into SaaS agreements, customers should determine where their proprietary data will reside and what rights they have to access that data, says Cicala. "If the deal goes south, you need to know where your data is and what kind of shape it's in," says Mankowski.

9) Non-negotiable? One of the biggest misconceptions about SaaS agreements is that they're simple "click-wrap" contracts that aren't open to negotiation, says Cicala. Customers figure they're already saving money, so they don't press the issue. "But the licensing costs are going to catch up to you," says Cicala.

10) Exit charges. Let's say an organization has signed a one-year contract for CRM services for 1,000 seats but wants out of the deal after nine months. In some cases, providers will hit customers with exit charges before giving them their proprietary data back, says DeSisto.

Source: 1

Prashanth Rai