Contracts vital to hosted software success: attendees

Get it all down on paper, SaaS users advise

Companies must make sure that they get adequate protection under contracts signed with providers of hosted software, said users at Computerworld US's SaaSCon conference. IT managers must also make sure that the provider will be around for the long-term, they suggested.

Ken Harris, senior vice-president and CIO of Shaklee a health food provider, said that IT managers must carefully consider the financial viability and technical capabilities of a hosted software vendor before signing on the dotted line.

"You clearly want to have some discussion beforehand," he said, adding that it's also a good idea to include a provision on what happens if the buyer or vendor is sold.

Harris suggested buyers of software-as-a-service (SaaS) products incorporate a clause requiring at least a 60-day notice of termination to resolve any support, application and system configuration issues.

He also noted that agreements with hosted software providers include specific data on: system availability; transaction response time; error resolution time; disaster recovery; and ongoing system enhancement and maintenance. "When I move to a SaaS-based relationship, I cannot just assume that any problems will go away or a desired service will be performed. You need this in agreement," he said.

During his career Harris has used hosted web analytics, online knowledge database, data warehousing, search and network management software.

Liz Herbert, analyst at Forrester Research said that CIOs and business executives must make sure that contracts with hosted software providers include provisions for accessing data at any time for ongoing reporting and integration needs and provisions for terminating contracts.

Karen Faire Scott, systems analyst for Camelbak Products a maker of hydration products, said that despite some past problems with hosted software providers, her company is now seeking a SaaS-based offering that can produce Oracle reports.

She declined to discuss the past problems or the vendors involved.

However, she noted, "The thing that would concern me is you have [a hosted application] working well and then your vendor disappears. A customer should have the upper hand in a SaaS relationship."

Don Green, manager of Accounting and Information Systems for Texas Aromatics, said the petrochemical company is now evaluating looking options for using hosted backup, disaster recovery and business continuity applications, but wants to make sure that the contract terms meet his needs.

Green said he expects that hosted software will reduce the need for internal technical expertise and will enable the re-purposing of IT resources, but before signing a contract, he wants to make sure that it can be terminated at any time for cause.

"What happens to customers in case we have to get a divorce? How are we going to transition through that?" asked Green.

Peter Quittmeyer, partner at law firm Sutherland Asbill & Brennan, said that service level agreements can also become a thorny issue between clients and service providers if performance expectations, enforcement terms or measurement parameters are contractually ambiguous.

Quittmeyer stressed that hosted software customers must regularly review existing SLA agreements with hosted providers and demand the right to "re-set" them due to changing technology or business requirements.

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