Stop Chasing Unlimited Liability In SaaS Deals

Clients tell us they are resistant to SaaS because of SaaS vendors’ unwillingness to offer unlimited liability. Sound familiar? It’s time to stop holding SaaS vendors to a higher standard than the alternative. Consider this:  In-house systems do not offer unlimited liability. Very few non-SaaS vendors offer unlimited liability.  

Say what? You did get unlimited liability?  If your vendor does offer unlimited liability, beware. Small vendors are all too happy to sign up for things in the contracts. But, it’s hard to get them to pay up in the event of a serious incident. More likely, you’ll end up spending a lot of time in court and find there’s no money for them to pay out. Be cautious when you see this because it rarely will do you much good and it may be a sign that the vendor is taking on deals that are unsustainable in other ways, too – which makes them a vendor viability concern.

What should you do? Instead of honing in on the legal language of liability, ask for some reasonable yet meaningful liability (such as 2 years’ worth of fees) and focus the rest of your energy on due diligence and pushing for transparency. Check out the vendor’s processes, policies, and third-party certifications. Approach this more as a risk assessment than a contract negotiation, working closely with your security and risk team (or partners). Also, look for signs of transparency. Leading SaaS vendors put out a lot of information about security, performance, and other key metrics. They foster a culture of openness and transparency.

Finally, keep in mind that a SaaS vendor will die off if they have a poor track record. That pressure generally keeps them more focused on delivering great service than a legal contract does.

This tends to be a contentious topic, and I’d love to hear perspectives and experiences.

Liz 

@lizherbert

Link Pricing To Business Drivers To Take Services Partnerships To The Next Level

Clients and services partners have talked for years about linking services partner pricing to business goals. However, traditional pricing models such as time and materials and fixed fee still dominate in services partnerships; examples of truly innovative pricing models are rare. Despite the rarity of these outcome-oriented pricing models, interest remains high. Clients frequently ask Forrester for examples of next-generation, innovative services pricing models. So, I’m writing this post to highlight two recent examples (showcased at March customer and analyst events) that truly push the envelope for services pricing models linked to business goals.

Example 1: Venture-based

At BearingPoint’s recent analyst summit, the EMEA-centric business consulting provider showcased multiple examples of venture-based engagement. The examples showcased go beyond the typical “VC fund” that we see at other services providers (in which an arm of the services vendor operates like a venture capitalist by doling out funds to a set of early-stage companies). Instead, BearingPoint gives consulting time and tools to select clients or alliance partners in return for equity. For example, Bearingpoint has a services-for-equity partnership with tracekey, an early-stage company focused on track and trace functionality for pharmaceutical companies. This means that Bearingpoint’s financial rewards are directly tied to tracekey’s results, without getting tangled up in managing to the contract terms or project dashboards.

Example 2: Consumption-based

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Salesforce Announces New Pricing And Packaging -- What It Means To You

After more than a decade of keeping its published pricing largely unchanged, Salesforce today announced new pricing and packaging for its core products.

What you need to know:

  • Pricing will go up for core editions. New Sales and Service Cloud Lightning Editions will come in three flavors: Professional Edition (PE) -- $75; Enterprise Edition (EE) -- $150; Unlimited Edition (UE) -- $300. The pricing will now be identical for Sales and Service subscriptions. (Previously, Sales Cloud was cheaper than Service Cloud and was a subset of the functionality that came with Service Cloud. More on the functionality implications below.)
  • The new "Lightning" packaging comes with enhanced functionality. PE adds Workflow, Console Light, Profiles, Record Types, Unlimited Apps & Tabs. EE adds Full Console, more Sandboxes, two-factor mobile identity, Unlimited Apps & Tabs. UE has more Sandboxes than before. You can see the announced pricing and packaging for all editions in the graphics below.
  • The “Russian doll” model will go away. In the past, Salesforce packaging was analogous to Russian dolls: Service Cloud encapsulated Sales Cloud, which encapsulated Force, which encapsulated Chatter. The new packaging breaks this model and means that a Service Cloud buyer will no longer get full access to Sales Cloud. Instead, there will be a bundled price for customers who choose to buy Sales and Service Cloud seats together. Both Sales and Service Cloud will still come with Force and Chatter.
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As Salesforce, The SaaS Behemoth Grows, So Does Pressure On Deals

This is the second post in a series on strategies and tactics for negotiating your licensing agreements with software companies including SAP, Salesforce, and Workday.

Salesforce is coming off of another banner H1 and monumental customer event, Dreamforce ’15. The SaaS giant continues its meteoric rise — now into full-blown CRM, Internet of Things (IoT), and broader platform use cases. Customers remain excited and enthusiastic about Salesforce’s potential to transform their business, and they continue to adopt more and more of the Salesforce portfolio.

This continued growth has also meant a greater deal scrutiny by customers big and small. Although Salesforce famously built its business by going direct to line of business leaders -- flying under the radar of corporate procurement and IT -- those days are coming to an end. Salesforce’s growing deal sizes and newfound position as a mission-critical, strategic platform have caught the attention of sourcing and procurement professionals, IT leaders, CFOs, and even CEOs and Boards of Directors.

As you think about your relationship with Salesforce and prepare for negotiations, here are some tips to consider:

  1. Have a thorough understanding of your current and future Salesforce usage. This will inform an appropriate and fair deal that you won’t outgrow too quickly.
  2. Remember that deal structure and contract terms and conditions are critical. It’s not just about your price or the discounts negotiated, but also the business value your company is receiving.
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Five Unique Customer Benefits Of The SaaS Model: Learnings From Workday Customers

Clients tell us they are turning to SaaS not so much for cost savings but primarily for greater business results: greater business agility and improved collaboration inside and outside the enterprise. But, what can SaaS applications provide that traditional, single tenant applications cannot?
 
At last week’s Workday Technology Summit, we heard firsthand from some major brands about the unique benefits they are achieving from using a SaaS solution:
 
1. Continuous innovation. Workday customers talked about two components to this benefit: 1) seamless, frequent, automatic upgrades and 2) ability to deploy changes quickly into your live environment.  
 
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Strategies For Negotiating With Salesforce.com In The Wake Of Its Growing Product Set And New Editions

Despite an increasingly crowded market of cloud applications, salesforce.com is still very much the “darling” of the SaaS world. Some evidence of the provider’s continued fast-paced growth?

1)      Strong stock market performance. On June 12, 2013, when salesforce.com announced the completion of its acquisition of ExactTarget, salesforce.com stock (CRM) was trading at $37.58. On February 19, 2014, it closed at just over $63, a gain of 67.7% over that period (for reference the NASDAQ Composite did roughly 25% over the same period).

2)      External accolades for its ability to innovate. In August, salesforce.com was names by Forbes as the world’s most innovative company for the third year running.

3)      Steady flow of new products and editions. In November, salesforce.com announced its new Salesforce1 Service Cloud – a platform to be used for cloud-based application development. This product represents a significant improvement in the mobile salesforce.com experience which will ideally aid them in meeting their aggressive financial predictions. Not long before that, salesforce.com had announced Social.com, in April 2013.

4)      Revenue growth. Salesforce.com’s recent fiscal results (Q3 2013) conservatively project revenue growth of more than $1 billion for both this year and next ($4.05 billion for FY 2014 and $5.15 billion for FY 2015, compared to $3.05 billion in FY 2103).

So, it is no surprise then (in light of salesforce.com’s massive scale and continued expansion) that we continue to receive a heavy volume of Inquiries into Forrester about how to negotiate with salesforce.com.

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IBM SaaS: Heavy On Choice – But Light On “Plug and Play”

IBM is making a big push into the SaaS space – boasting 100+ SaaS offerings and $1 billion plus in targeted investments. The good news for buyers is that the strategy is broad, flexible, and open. But, the downside is that the current landscape is fragmented and inconsistent across its different offerings; buyers do not today have a simple “cloud store” where they can go and download all of these different solutions with instant provisioning and pre-built integration. So, what should buyers expect?
 
What you will get:
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Salesforce.com’s Private AppExchange Can Streamline Multi-SaaS Sourcing

salesforce.com’s 100,000+ customers now have a new option for streamlining SaaS sourcing across the enterprise: Private AppExchange. And, the price is right at $0. Free? Yes, free(!) but, don't assume this won't impact your costs.

Last week at salesforce.com's massive Dreamforce event, Forrester had the opportunity to learn more about some of salesforce.com's recent announcements -- including the Private AppExchange. This free add-on feature for salesforce.com users lets companies set up an AppStore that is private, personalized, and custom populated for their own company. The Private AppExchange lets organizations “distribute any app, to any user on any device through a central, secure store, using Salesforce Identity to grant employees instant access to the apps they need. Organizations can customize the store with own categories and branding.”

The Private AppExchange could help sourcing executives address goals for enabling SaaS sourcing that we frequently hear about, such as:

  • Lets users quickly discover and deploy solutions that meet their business needs
  • Supports collaboration and idea-sharing across all users at all levels of the company
  • Adheres to corporate standards (integration, data rules, security, contracting, and more)
  • Ensures favorable pricing based on overall corporate relationships and usage
  • Showcases the specific SaaS solutions already in use within the company
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What Factors Can Make A Complex SAP Project More Likely To Succeed?

At a recent SAP customer event on Business Transformation, Alexander Budzier from the Said Business School at the University of Oxford presented findings on IT project outcomes and their correlations with various project factors. When determining project success rates, the researchers considered business benefits, adherence to budget, and on-time delivery.

Interesting findings from this research include:

  • Project success does not correlate (or very minimally correlates) with size or length of project, or with public versus private sector.
  • Focusing on one goal too much can have a negative effect on other metrics. Consider the extreme example of the Olympics, which had a 100% on-time result (over 10 Games analyzed) but the highest cost overruns, at an average of 207%!
  • Agile deployments (versus big bang) had greater success in some metrics, particularly schedule adherence, but not all.
  • The single biggest factor in determining project adherence to budget and timelines was benefits management. (In this research fewer than half of the projects they studied had actually tracked benefits.)  Those who focused on measuring benefits significantly reduced BOTH project cost and schedule risk. Project cost overruns averages decreased from 36% to 6% when focusing on business benefits; schedule overruns decreased from 119% to 51%.

So, what can we take away from this? Project leaders should:

  • Focus on benefits – throughout the project lifecycle. Benchmarking can help leaders to identify what benefits / metrics to track.
  • Recognize warning signs / risks early -- and address them before they result in disaster. These risks include unknowns in design, organizational resistance, and shifting project requirements.

Sourcing Strategies To Drive Digital Disruption: Early And Fast-Evolving

Leading-edge executives at organizations drive growth, innovate, and disrupt industries through emerging technologies: social, mobile, cloud, analytics, sensors, GIS and others. 85% of executives in a recent survey shared that “the need to drive innovation and growth” would have a moderate or high impact on IT services spending. But, today’s technology buyers face a fragmented, fast-moving landscape of niche technology and services providers in newer spaces (social, mobile, cloud) as well as new offerings from their largest global partners.

Often the leading- and bleeding-edge disruption comes from business stakeholders, rather than IT or sourcing executives; sourcing executives struggle to keep up with the fast pace of change that business demands. Our research shows that this fragmented, divisional, silo approach to buying (often under the radar screen) can create risk and go against enterprise IT strategy decisions.

To help their organizations navigate through these emerging options, we have identified three key principles of IT sourcing strategy:

  1. Change the rules for working with vendors and partners. To thrive in the world of digital disruption and to enable sourcing of emerging technologies and services that drive digital disruption, sourcing strategists must create new rules for working with technology partners. They must increase the emphasis on innovation and differentiation and treat partners who excel in these dimensions differently from other tiered suppliers.
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