How To Select a SaaS Provider

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As the economy recovers, customers are beginning to look at ways of cost-effectively expanding their offerings. IT solution providers are fielding requests for software as varied as payroll and workforce management suites and online video training. Leveraging a SaaS provider for a best of breed solution and providing added value can be an effective alternative.
Alexandra Arbelaez, Business Development Manager at, explains how to get the most out of a SaaS provider partnership.
-- Jennifer Bosavage, editor

As the economy begins to show signs of exiting the recession, organizations are beginning to start purchasing again. However, companies are primarily still looking to continue to keep costs down and improve overall productivity. In a world of constantly evolving technology, IT solution providers are the source for the most advanced, up-to-date hardware and software to streamline internal and external processes.

With the economy’s increasing health, come clients’ increasing needs. But who offers the means to satisfy virtually all those demands? A number of service-centric IT solution providers are looking to third party software or content providers delivering under a Software as a Service (SaaS) model to increase their overall product offerings. As an example, such applications could include HRIS, payroll and workforce management suites, while content and services may include skills assessments, employment eligibility verification, background checks, benefits enrollment, voluntary insurance programs, and online video training.

VARs are not expected to both deliver and develop these applications internally, so leveraging a SaaS provider for a best of breed solution and providing added value can be an effective alternative. In order to understand how to get the most out of a SaaS provider partnership and address common concerns, this article is broken down into three levels: Business, Content and Service.

Business Level

Just as your client relationships require teamwork, ongoing collaboration, and clearly defined business objectives, so do SaaS provider partnerships. The first order of business is to protect your organization and ensure the most profitable partnership possible at the Business Level. Who owns the client? Who owns the data? Who is collecting revenue? The answers to these questions will be dependent on the type of partnership you enter into.

One type of partnership is considered a referral arrangement. This 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 money, the SaaS provider would provide technical support. While this partnership may require the least amount of resources upfront and to support, there is also less opportunity to capitalize on a significant portion of the revenue stream, and potential mindshare of maintaining a direct relationship with your client.

A licensing agreement, however, 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. If you’re offering a third party SaaS application, it’s likely your provider won’t make money until you make money because of the pay-as-you-go model. Your success is their success. Your failure is their failure.

Who Owns the Client?

Typically, with most licensing agreements in which the VAR pays the SaaS provider for rights to access the application, the VAR determines the pricing structure to sell to clients and in turn, collects revenue directly. Under this scenario, the VAR collects an application usage fee that is significantly more than a referral arrangement would offer.

Since the VAR is collecting the revenue, they will likely collect and handle most support issues as well. SaaS providers commonly train the VAR in the application being licensed so they can provide tier one support to clients directly. That 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.

Who Owns, Protects and Stores Data?

One of the more challenging hurdles when it comes to either partnership with a SaaS provider is data protection and ownership. The party responsible for safeguarding data may very well not be the same party that owns the data. In most cases, your client will own the data.

Normally, data storage and protection are not left up to the client. To minimize risk and ensure data is properly safeguarded, IT solution providers should ensure SaaS providers store it in a SysTrust and SAS-70 compliant environment. After confirming the safety of data, VARs 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.

As garnished information is used for various purposes, some legal, it is necessary to find out what type of data, raw or calculated, is being stored. Raw data would be actual numbers, as opposed to calculated, which has already been processed to some degree. If the data is calculated, you should consider what complications might exist down the road in the event a change in SaaS provider is required. For legal auditing purposes, some labor-specific data, such as employee in and out punches, are required to be stored as raw data.

Given the importance of not just data security, but availability of an application and the underlying data being stored, VARs 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 occurs, 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.

How To Limit Business Risk and Liability?

After confirming client and data ownership, additional consideration needs to be given to limiting overall business risk and liability. A lot of up and coming SaaS providers out there have a great product or service offering, but haven’t been around for many years. Without having a well-established reputation for you to base your partnering decision on, as an IT solution provider, you can at least position contract negotiations around business continuity.

As with any less established provider or vendor, request certain representations and warranties to be included in the referral or license agreement. Together, these “reps and warranties” should address past, present and future concerns, and define further assurances the SaaS provider will make regarding business continuity. Such reps and warranties, coupled with properly documented errors and omissions coverage (as well as general business liability insurance, etc.), should be spelled out and included as an exhibit to the agreement.

By simply making such requests, you’re able to quickly get a feel for the reputability of a SaaS provider. Specific conveyances, like the SaaS provider having never been involved with any type of litigation and doesn’t have any pending threats of litigation, can raise confidence levels. The same would hold true regarding any insurance policies that may have been the subject of a dispute. Incorporating these items upfront can set the stage for a long and trouble-free partnership, where in the event of a client dispute, may serve as guidance that proper due diligence was performed prior to adding such SaaS providers’ applications to your product and/or service mix.

Application availability, as well as data security, should also be well documented. Depending on the partnership in place, the organization that assumes responsibility for accuracy of data will most likely also be responsible to ensure the application is available, subject to scheduled maintenance and other agreed to circumstances. Regardless, both during active usage and after any transition away from a specific SaaS provider, you should confirm access to historical data. That is essential for auditing purposes.

The final aspect at the Business Level is a common concern when it comes to partnering with a SaaS provider: competition. What’s to stop the SaaS provider from going over your head, and gaining a direct relationship with your clients? Some, but certainly not all, SaaS providers only partner with the channel, such as IT solution providers. The most certain way to ensure you’re not competing is to look for a SaaS provider that does not market or sell direct to the end-user, at least not for the client segment you target.

Content Level

Many VARs are continuing a path of growth by offering a wide range of the best all-inclusive solutions at a fair price. In order to do so, robust applications and a reliable technology platform are required. If those applications are coming from multiple SaaS providers, they should be able to integrate and work together. Equally important as integration is the overall breadth and depth of the applications your clients are using, and the experience they have while using them. Although the suite of solutions you’re providing may be comprised of applications from multiple SaaS providers, on the surface, clients and VARs should experience them virtually as one.

How Do I Ensure My Clients Have a Seamless User Experience?

The integration your clients experience is happening at the user interface, or presentation layer. The applications integrate data and/or functionality through the use of mashups, whereby widgets, or smaller subsets of data or functionality, are incorporated into a single screen. Rather than having multiple logins for multiple applications, you can provide a single login to access all applications based on authentication of user credentials. 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. Since “comprehensive” VARs may not be appropriate for all clients, there must be an ability to use a mix of on-premise resources and outsourcing to a VAR. This can be accomplished if the SaaS provider sets tools in place to grab and upload data from existing on-premise applications. Many SaaS providers refer to similar data exchange tools as middleware or appliances.

In addition to grabbing information, tools should exist to export data. You should confirm that data is stored in such a way that it will be recognized by other applications, and which field values will be possible to access or export information from. SaaS providers should also supply multiple vehicles with which data can be communicated or exported. That will allow your clients, for instance, to export data as an Excel, PDF or CSV file, and possibly HTML or XML if Web services are preferred. Those tools are all necessary for reporting purposes, offsite data storage and application integration.

The tool should also include some type of alert mechanisms that will contribute to the accuracy of data exchange and ensure you and your clients are getting the most out of application integration. More than simply confirming that this tool is in place, you should confirm what data elements can be passed, how they are passed, and what exceptions can be flagged. Once this information is acquired, you should be able to define which alerts are thrown under which circumstances. For instance, alerts can be thrown for missing data, misformatted data, or an application or service that is not available at a given point in time.

Service Level

Certain embedded tools exist that afford accuracy and thorough tracking of support issues. At the Service Level, it’s the tools an SaaS provider has to offer that provide timely responses.

As the choice of product offerings and client base expand, customer support becomes increasingly more difficult. The major challenge in providing support is the ability to manage and prioritize calls and/or emails. Call volume is ever changing and difficult to predict, and can therefore be the major factor holding an organization back. A common solution to this problem is to implement back-office tools like issue tracking or a feedback ticketing system. Not only will a feedback ticketing system help reduce calls and streamline support, but the information and communication strings can also help establish a self-help knowledge base over time with proper culling of data. Because most feedback ticketing systems are available at the time an issue surfaces and are accessible from within the application itself rather than through an external system, there is a higher probability of receiving feedback. Through the system, your organization would be better equipped to assign tickets for completion, while tracking the status of inquiries through resolution.

Before deciding to partner with a SaaS provider, taking a closer look at the three levels of a business partnership will ultimately help accomplish your top goal: establishing yourself as a reputable VAR and the leader in your space.

Organizations came to you for alternative ways to produce a similar amount of output with fewer resources in down times; as the economy improves they are looking to invest in areas that help produce more out of existing and new resources during good times. For those IT solution providers equipped to capitalize on this trend, a wealth of opportunity exists.

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