FAQs for Selecting a SaaS Provider

By Alexandra Arbelaez

The process of switching over to a Software-as-a-Service (SaaS) offering and looking for a new provider in general is a difficult process that involves a lot of industry knowledge.  You’ll likely have a few providers you are evaluating and it is important to have a pre-defined set of questions to ensure you’re making the right decisions during the selection process.

To assist in this process, we’ve developed a list of FAQs for Selecting a SaaS Provider to ensure your company knows the questions to ask and what industry standards are. It is important to reiterate a lot of these questions to your potential provider to ensure your needs will be met and the proper expectancies have been set beforehand.

Q: What types of partnerships exist for my organization to choose from?

A: Referral arrangement or license agreement.

Q: What does it mean to take part in a referral arrangement?

A: A referral arrangement is essentially co-branding, marketing and reselling a SaaS provider’s application. In this scenario, once a client begins service utilizing a specific application, they’re effectively passed back to the SaaS provider. Although partnership agreements vary, it’s likely that revenue would be tied directly from your client to the SaaS provider. Similarly, since support is typically linked to the organization collecting the revenue, the SaaS provider would also take care of technical support. While this partnership may require the least amount of resources upfront and to support from an ongoing perspective, there is also less opportunity to capitalize on a significant portion of the revenue stream. You will also lose the ability to maintain a direct relationship with your client over this additional service area with this type of relationship.

Q: What does it mean to take part in a license agreement?

A: A licensing agreement enables you to collect revenue at higher percentages, and may offer more branding opportunities because of the possibility of a private label model, in which you could offer a specific application under your organization’s name as part of a bundled service. In this situation, it’s likely your provider won’t make money until you make money because of the pay-as-you-go model. This means your success is their success and your failure is their failure.

Q: Who owns the client?

A: Typically, with most licensing agreements in which you pay a SaaS provider for rights to access the application, you would determine the pricing structure to sell to clients, and in turn, collect revenue directly. Under this scenario, you would collect an application usage fee significantly more than a referral arrangement would offer.

Q: Who is responsible for supporting the client?

A: If you are collecting the revenue directly, you will likely be the first line of support and handle most support issues. SaaS providers commonly train you in the application being licensed so you can provide tier one support to clients directly. This is not an absolute, however, because ultimately the two factors that determine which organization will deal with a particular issue are (1) whether or not it is, in fact, a deeper technical issue, and (2) the level or degree of complexity associated with the resolution.

Q: Who is responsible for data storage and protection?

A: Normally, data storage and protection are not left up to the client. To minimize risk and ensure data is properly safeguarded, you should ensure SaaS providers store it in a SysTrust environment that has completed the necessary audits. After confirming the safety of data, you should confirm what the client is going to be able to do with that data. Data should be stored in such a way that it can be used by other external systems in an industry-accepted format. Otherwise, the data might not be easily read or utilized in the event it is needed.

Q: How can I ensure the availability of my data?

A: Given the importance of not just data security, but availability of an application and the underlying data being stored, you should consider how well a SaaS provider documents what’s required to provision servers and associated third party software, commonly referred to in the industry as a technology stack. So what happens if something more drastic happens, like a natural disaster or the SaaS provider goes out of business? Having just source code alone in most cases isn’t enough to get an application up and running and re-establishing access to data that’s been stored. Updated versions of object code (a compiled version of source code) should be kept in escrow along with source code to help ensure an application can be easily ported to another data center in the event of discontinuation of service for whatever reason.

Q: How can I limit business risk and liability?

A: It’s important to request a significant amount of documentation. Such documentation includes representations and warranties, proof that the SaaS provider has never been involved with any type of litigation and doesn’t have any pending threats of litigation.  It is also important to receive copies of insurance policies, standard application availability statistics and maintenance schedules, and access rights to historical data.

Q: How do I ensure my clients have a seamless user experience?

A: As long as the other applications are web-based, have an open architecture, and the providers are willing to invest help, you can achieve that next level of automation with a centralized web portal. Transparency and portability of data also impact the degree of integration and ease at which applications can speak to one another.

 If you have any other questions that should be asked or relevant areas that others should be focusing on when choosing a SaaS provider, please leave a comment.

About Alexandra Arbelaez:
Alexandra Arbelaez is the Business Development Manager at SaaShr responsible for nurturing existing relationships and prospecting for new channel opportunities through market research and contact management.

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