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How IT leaders can negotiate a SaaS partner contract

John Moore | July 11, 2012
All companies great and small will eventually work with a SaaS provider. In most cases, the standard contract should suffice, but CIOs will never know what they can add (or subtract) if they don't ask.

Thomas Trappler, director of software licensing at UCLA and SaaS contracting instructor at the school, has encountered a fair amount of reticence among individuals facing down a SaaS deal. A recent exchange between Trappler and a student in his Contracting for Cloud Computing Services class provides an illustration.

"One of the participants asked, 'What should I not ask for when negotiating with a cloud computing vendor?'" Trappler recalls. "This presents a good example of a common misconception that there are things that a client organization can't or shouldn't ask a cloud vendor to provide."

Analysis: 5 Things You Need to Know about SaaS Contracts

CIOs and IT administrators will increasingly find themselves sitting at the table with companies providing SaaS solutions, from enterprise software vendors to local value-added resellers and managed services providers. Gartner predicts worldwide SaaS revenue to hit $14.5 billion this year, a nearly 18 percent boost compared with 2011 sales. The market watcher forecasts "healthy growth" through 2015, with a $22.1 billion market that year.

The shift from traditional, on-premises software delivery presents a different twist on contracting. Moving software to the cloud raises performance and security concerns; organizations may need to articulate their specific needs to the SaaS provider. Another consideration is managing SaaS contracts once the ink dries. Large enterprises, in particular, may need to establish vendor management programs as the number of SaaS partners proliferates.

Negotiations: You'll Never Know If You Don't Ask

Before launching talks with a SaaS provider, an IT organization should ask itself a few questions. The idea here is to obtain a solid grip on needs and goals while identifying the most pressing items to nail down in a contract. As for the latter, Trappler, who created a 137-point checklist of cloud computing contract issues for his book Contracting for Cloud Services, points to two key questions cloud buyers should consider-How sensitive is the data that they will be moving to the cloud? How business critical will the cloud service be to their operations?

It's time to talk when an organization finds a SaaS provider's standard contract doesn't align with its needs, he says. "Be prepared to explain your needs to them and ask them to make changes in order to align with your needs. You may not get everything you ask for, but you definitely won't get it if you don't ask."


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