Getting the right SaaS business model

Advice 2010-02-22 15:27

Keith Bates, chairman of the Cloud Computing Centre offers some guidance for a successful SaaS

From creating the right pricing model to gaining support in the sales process and ensuring ongoing innovation, just what are the questions organisations should ask of a potential managed services provider? Keith Bates, chairman of the Cloud Computing Centre offers some guidance for a successful partnership.

ISVs and VARs are under increasing pressure to adapt to the utility computing trend and offer customers a Software as a Service (SaaS) option for software acquisition. But making the transition from on premise to SaaS requires more than finding a technically robust datacentre.

1. What datacentre resources do I need? It may seem a simple process to sign up to a datacentre provider; indeed many provide pricing based on information completed by the ISV via a basic web form. But for any organisation moving from on premises to SaaS, defining requirements is not this straightforward. ISVs need to work closely with a provider that is experienced in delivering cloud computing and is able to discuss and debate the proposed business model to ensure the right, flexible datacentre resources are acquired.

2. What are the new contractual issues to consider when moving to utility computing? Creating the right type of agreement for the new SaaS business model is a key consideration for ISVs. Does the managed services provider offer a white label agreement that can be used as part of the sales process?

3. How do I determine viable Service Level Agreements (SLA) for customers? ISVs need to translate the SLA delivered by the managed services provider to an SLA that can be offered to customers which will incorporate additional elements, such as application service and support. This SaaS model typically includes performance led rebates and penalties and it is essential that ISVs understand both expectations and customer commitments up front.

4. What is a competitive price? How does an organisation transition its pricing model from on premises to SaaS? Critically, is the ISV taking advantage of the new software licensing offerings from key vendors including Microsoft and Oracle? Microsoft’s SPLA licensing for example, offers monthly licensing that can be flexed up and down in both volume and version, providing perpetual software version assurance, allowing organisations to utilise just the licences required.

For example understanding the differences between “authenticated and non authenticated” licensing can yield potentially huge savings in web based applications. The appeal is great, reducing the need for capital expenditure, but the pricing model is complex, so it is essential to work with a provider that can provide a highly transparent approach to this flexible software licensing.

5. How do I ensure customers achieve continual upgrades? It is also important to consider software assurance, so ascertain what software upgrades are included in the pricing to ensure customers achieve continual improvements. The right provider should both advise and manage the delivery of software, ensuring that upgrades are bundled within the monthly cost.