What to Consider When Sourcing a SaaS Application

We are pleased to bring you this guest post from Sanyam Khurana of GEP, whose Knowledge Bank is a rich and varied source of procurement thinking. This time, GEP talks about considerations when buying a SaaS solution.

IT has been a strong enabler for many years to large parts of an organisation. Hardware helped solve many erstwhile problems on means to communicate through systems whereas software solved the processes and ways communication took place. Along the road, the ability of software to solve real-time problems grew increasing focus and demand from various business units. Somewhere down the road, in the past decade, the demand outgrew the CIO-driven strategy where systems could shake hands and software could talk. As a result, an organisation finds itself in a situation with a hairball of applications, software suites and platforms across the firm that remain standalone, do not interact and create mammoth IT maintenance costs.

Sourcing SaaS applications can be a tough task if the right scope is not defined along with the business justification of the ‘need’ rather than the ‘desire.’ In order to justify the same, there are multiple factors one should look out for when shopping for SaaS in the market:

  • The eternal Quality vs. Cost debate:
    • Many SaaS products could come at a significant lower cost. Consider twice before investing in a new platform or moving to a new service – the immediate impact will be cost savings, however in the long run it may have significant implications on service delivery and cost, especially platforms that can be very sticky to move away from. One must closely analyse future growth scenarios and make smart investments in core software systems that will scale with the company’s growth. If a vendor loses on a feature or does not have one, they can always make up for that over time; but if they lose the ecosystem, they might never be able to come back -- a classic example being UNIX.
  • Buy an ‘articulated strategy:’
    • Many companies face challenges and accelerate problems when they consolidate third-party applications that need laborious IT development hours. Instead, they should find a solution that helps perform the functions of all silo systems in integrated fashion by eradicating the need for such systems over the course of time. Subsequently, a well-articulated strategy is crucial for success of the software firm and the client. One needs to look for how the software company’s products operate in a cloud environment — particularly their integration with other applications that the client currently houses. Not watching out for that could lead to multiple applications, software and unorganised processes that need more time and money for replacement than it took to buy them in first place.
  • Imperative due diligence:
    • Alongside the business strategy, buyers of software must evaluate the integrity of the business and the supplier power in the market. Alongside supplier financial strength, solution scope, customer service and innovations must be regarded as important parameters to qualify the purchase. For companies that focus majorly on in-house development, investing in solutions that are customisable and open-source may be worth considering.
  • Detangling the hairball:
    • For companies struggling with a hairball of software previously purchased, adding problems with fancier workaround spreadsheets, third-party applications and single-use integrations that need laborious IT maintenance for years to come does not make sense. Exploring integrated or cloud-based platforms that sync with the company’s strategy on areas of revenue and cost management is advisable along with simpler financial analysis of marketplace, profitability and building growth strategies for future.

Keeping the above points in mind while shopping for a SaaS solution for any business. A comprehensive analysis of current situation and future state must be devised, and one that syncs with the organisation-wide CIO/IT strategy.


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