10 Factors to Consider When Selecting SaaS Solutions

We are now moving from the out of the early adopter stage and into the early majority stage of the Software as a Service (SaaS) technology adoption cycle.  An exploding number of organizations are considering SaaS to take advantage of the lower up-front costs, lower total ownership costs, and faster implementation when compared with traditional licensed software.  While evaluations of traditionally licensed software by organization is a well understood activity, the relative youth of the SaaS market means many organizations are still developing their evaluation methodologies, while others have suffered through SaaS horror stories.

Because of the unique requirements for delivering Software as a Service as opposed to deploying a system behind the corporate firewall, a mature SaaS solution should be evaluated against different factors and criteria.  Ten of these factors are:

  1. Subscription Management – The ability to manage your subscription by adding features, increasing the number of seats, changing payment methods.  Is this available through an online interface or do you have to talk with an account representative?  Mature SaaS solutions generally provide an interface for this to reap the lower support costs.
  2. SLAs (availability, performance, scalability) – Providing some Service Level Agreements (SLA) for availability, performance and scalability are very important.  You will be at the mercy of the SaaS provider, with SLAs that could materially impact your business and leave you with no recourse.  Mature providers know this and are willing to provide assurances.
  3. Data import/export – While the service provided by a SaaS solution is the main value, often the data accumulated has a large value as well.  The ability to get data into the system and out of the system is in important consideration.  This is also important to prevent vendor lock-in, especially given the relative immaturity of the SaaS market.
  4. Integration – While the service provide by the SaaS solution can be compelling, it is usually only a small part of the overall business process for an organization.  The ability to integrate the SaaS solution with other enterprise systems either behind the firewall or in the cloud can be critical to realizing the long term ROI goals of a SaaS solution.
  5. Configuration/Customization – SaaS solutions provide a standard set of out-of-the-box functionality.  Most organizations will not mesh directly with the standard feature set.  The ability to configure and customize the solution can be the difference between a successful adoption by the organization and another piece of shelfware in the cloud.
  6. Delegated user administration – Once an organization subscribes to a SaaS solution they should have complete control over the administration of their users.  For large scale adoption, greater than a few dozen users, the ability to delegate user administration to different areas of the customer organization is critical to being able to manage and roll out the software.  The SaaS solution should provide a complete set of capabilities for user management.  Relying on the SaaS provider’s support for user administration is another sign of an immature SaaS product.
  7. Security – Closely related to the user administration is the security administration.  Being forced to follow a set security model (e.g. a fixed set of roles and permissions) will inevitably lead to frustration.  While the security model of the solution is fixed, organization differences require security customization to lie in the hands of the SaaS customer.
  8. Reporting – In order to manage and integrate the SaaS solution into the larger business process, reports are often crucial.  Unlike COTS products, you do not have the option of rolling out your own reporting system for a SaaS solution.  A mature SaaS solution typically has a flexible reporting engine, a comprehensive set of standard reports and the ability to customize and run ad-hoc reports as well.
  9. Monitoring – Given the pay for usage model of SaaS, monitoring capabilities are important.  Can you track the availability of the solution?  Do you know when you exceed your current pricing tier and can expect a larger monthly bill?  Can you track the usage of your users day-by-day, hour-by-hour?  These are all important capabilities for managing the SaaS solution to insure success and a positive ROI.
  10. Business viability – The viability of the vendor is also important.  If a COTS vendor goes out of business, then you may not receive updates or upgrades to your product, but you can continue to do business and plan for a transition to a new solution.  With SaaS, when the vendor goes out of business you may be left high and dry.  Can your company survive if a critical business process is unavailable for a month or two unexpectedly?  The quality of the business can be as important as the quality of the solution when choosing a SaaS solution.

As companies contemplate SaaS solutions they need to look beyond the functionality provided to some of the unique issues with the SaaS model.  While SaaS has some compelling advantages compared to the traditional COTS product or custom development, it also has its own set of “gotchas.”  Don’t be another SaaS horror story, pick your solution with care and consider all the factors.


  • Jontiy May 31, 2010

    When Considering the Security Section is it better to mention the SAS 70 Standard achieved or not ?

  • Mark Smith June 2, 2010


    This blog entry tried to address some factors to consider when selecting a SaaS solution. Security issues such as SAS 70 compliance are certainly important and may for some customers be a requirement, but there are plenty of SaaS solutions that may not yet have achieved SAS 70 compliance and still provide a viable and reliable solution for their customers.

    The issue I choose to highlight around security administration is one that has tripped up SaaS adoption for many customers.

    Do you have experience with any SAS 70 compliance issues with SaaS adoption? I would be interested in learning about it. Thanks for the comment.

  • Adam July 15, 2010

    This a a really good list. I am glad I stumbled upon this post.

    • Mark Smith July 16, 2010

      Adam, I am glad you like the list. Have you been involved in selecting SaaS solutions, or is your interest because Via Subscription provides a SaaS solution? Are your subscription management capabilities able to be integrated with SaaS solutions or are they more standalone? I was not able to determine from the website.

      Glad you liked the post, please check out my latest post ISV Model Evolution at Play as well. Thanks.

  • Software consulting March 30, 2011

    Though I agree that you need to choose an SaaS firm carefully in order to get the right service for your business I would like to point out that the benefits of SaaS far outweigh the risk. Seeking an established firm with a good track record will afford a business the benefits of lower cost and increased profitability along with scalability. Features such as reporting and monitoring are accomplished with ease and security is at the top of all good providers list as they rely on customer service and secure environments to keep the client coming back month after month. With all due respect, the SaaS model is a viable and solid way to lower cost while increasing efficiency. Thanks for the post.

    • Mark Smith April 5, 2011

      I certainly agree that in general SaaS has many benefits and businesses should be evaluating SaaS solutions, but this post is about evaluating a specific SaaS solution.

      While I recognize business viability (factor #10) as an important characteristic for SaaS, it is not enough to guarantee lower costs and increased profitability and scalability. In fact, my post ISV Model Evolution at Play discusses how established ISV firms can be at a disadvantage when looking to provide SaaS solutions.

      While I agree that “good” providers provide reporting, monitoring and security, that is why they are good providers. The post is about how to identify a good provider.

      SaaS is without a doubt a model that all businesses should be leveraging, and I expect that SaaS solutions will become an increasing part of the market as time progressives, but not all SaaS solutions are good solutions. There are plenty of examples of companies that have had bad experiences with a SaaS solution. This post aims to help businesses identify the good providers that will build the SaaS market and avoid the poor solutions that will ultimately not survive.

      I totally agree that the SaaS model can be a viable and solid way to lower cost while increasing efficiency and I hope my post does not give the impression that I am skeptical of benefits of the SaaS model.

      Thanks for your comments.

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