2. Negotiating the Right Contract

The individuals responsible for choosing to a SaaS solution are often business users, notes the report, not IT people or solutions sourcing professionals—the director of sales and marketing or the director of customer service, for example. (See "Will SaaS Have a Friend in CIOs?" for more on this topic.)

"As a result, they may be unfamiliar with the more technical aspects involved in choosing a SaaS application and thus may not know to include key items in their contracts," write Band and Marston.

In addition, the analysts point out that most SaaS vendors don't provide a formal service-level agreement (SLA) to "avoid risk and responsibility when selling directly to business users. Instead they rely on a 'best efforts' agreement." And if it's not in writing, SaaS customers have little recourse.

Band and Marston write that companies need to protect themselves from these contracting pitfalls:

1. Hidden cost drivers. When the amount of data and transactions increase on the SaaS application, so too will the costs on the overall deployment.

2. Unexpected service outages. Most of the users interviewed by the Forrester analysts hand no complaints about the typically 99.5 percent guaranteed uptime built into their SaaS SLAs, "but few contracts include planned maintenance windows into that uptime—and few users track actual uptime," Band and Marston write. "Although some SaaS providers claim to track outages proactively, users generally shoulder the responsibility for tracking and requesting payouts [and service credits] themselves."

3. Declines in customer support. Some users pointed out that they were satisfied with the initial customer support and help desk responses from the SaaS vendor. However, over time, the ease with which they could get support from senior-level and key developers has decreased. One customer claims "to be stuck behind two tiers of technical support," states the report.

4. Obscure disaster recovery procedures. "Although the SaaS providers can talk at length about their security and disaster recovery capabilities, we find that users have generally far less conviction when asked what security and disaster recovery clauses are included in their SLAs," write Band and Marston. "Make sure to perform due diligence around disaster recovery prior to signing the contract."

3. Follow the Right Implementation Approach.

The analysts point out that SaaS solutions "are typically easier to implement than on-premise offerings, but customization is more limited."

However, whether a company implements and administers the new CRM SaaS solution in-house, rely on the vendor or use a vendor's third-party professional services partner, "successful implementation and integration requires that you follow sound practices," states the report.