10 Risks to Consider Before Buying Software-as-a-Service

10 Risks to Consider Before Buying Software-as-a-Service

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It’s no wonder IT executives are shifting from having to install, support and update on premise software products in favor of service models that suppliers host, manage and update for them in the Cloud. The pitch is compelling: pay only for what you use, let the supplier do all the work. “SaaS is the dominant mode of cloud computing and will continue to grow, consuming nearly 60% of all cloud spending by 2021,” reported IDC in July.


The key differentiator between SaaS and on-premise software is service: SaaS promises acceleration, ease of use and business agility that a traditional on-premise software cannot match. SaaS solutions eliminate the need for frequent upgrades, expensive data center hosting and application management costs; they also drive streamlined business processes based on industry best practices, integrate easily with 3rd party applications, and scale seamlessly. But along with these benefits, organizations must address the following questions and risks as they migrate to SaaS solutions.

1. Data Security and Privacy


How is your SaaS provider handling your data, including sensitive customer information? What controls are in place to secure it? What legal assurances do you have?

2. Control of your Data


Who owns your data? Where will it reside? Who has access to it? How will your SaaS provider use it in its sales process with you?

3. Service Performance and Availability


How is your SaaS provider ensuring that your users have the necessary access to their service? What performance guarantees has your SaaS provider made, including financial ramifications if service is not available? How do these compare to the current on-premises service experience?

4. Unexpected Feature/Functionality Changes


You will be on this platform for several years. What contractual protections do you have to ensure your SaaS functionality and interface do not change and hurt your business and users? Do these protections carry over into future contract terms?

5. True-Downs and Divestitures


Businesses often shift gears due to economic changes or merger and acquisition activity. Does your contract allow bi-directional elasticity of demand, which means more or fewer users? Are you being conservative in your contractual demand forecast?

6. Renewal Issues


Price increases: What protections or caps are in place to ensure your SaaS pricing does not change beyond what is expected or commercially competitive? Changes in Demand: How will your SaaS provider price the service if demand increases or decreases? Will unit pricing go down with additional users or transactions, or be re-priced if you reduce demand?

7. Data Disposition at Contract Termination


How quickly can you get your data back if you decide not to renew the contract? Will it be in a usable format?

8. SaaS Provider Insolvency/Change of Ownership


Thousands of SaaS providers of varying financial standing are competing in the market. Others are being acquired by larger vendors looking to bolster their product portfolio rather than build it themselves. What contractual rights do you have if your SaaS provider is no longer viable or gets acquired by another vendor?

9. System Integration


The SaaS decision cannot be based solely on platform cost. Have you conservatively calculated how much it will cost to implement -- and had this corroborated by an independent 3rd party (not the SaaS provider)?

10. Long-Term TCO


SaaS is part of every smart IT plan for its speed and ease of use, but IT executives must prepare for these purchases more carefully than a traditional on-premise software purchase. IT teams must address these risks early in the SaaS buying cycle – when they have the most leverage – because these risks and costs are nearly impossible to fix downstream.



SaaS is part of every smart IT plan for its speed and ease of use, but IT executives must prepare for these purchases more carefully than a traditional on-premise software purchase. IT teams must address these risks early in the SaaS buying cycle – when they have the most leverage – because these risks and costs are nearly impossible to fix downstream.