AG Customer Bill of Rights - SaaS - Live

Customer Bill Of Rights:

Software-‐as-‐a-‐Service
39 Best Practices To Improve the SaaS
Client -‐ Vendor Relationship
October 12, 2009
By R “Ray” Wang
With Jeremiah Owyang

Includes input from 57 ecosystem
contributors

Content Protected Under A Creative Commons Attribution-Share Alike License 3.0

Figures ©2009 R Wang & Altimeter Group LLC. All rights reserved. Reproduction by request.

Published by Altimeter Group, LLC. | 1855 South Grant Street, Suite 100 | San Mateo, CA 94402
www.altimetergroup.com
2 Customer Bill Of Rights: Software-as-a-Service
Ecosystem Input -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐3

Influencer Input -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐3
Vendor Input-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐3
Customer Bill Of Rights: Software-‐As-‐A-‐Service-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐4
Purpose And Intent-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐4
Executive Summary -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐4
Cost Transformation Drives Mainstream SaaS Adoption-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐4
SaaS Licensee’s Rights Must Reflect Unique Business Model Considerations -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐6
SAAS Bill of Rights Span a Continuous Ownership Lifecycle -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐7
Section 1: Ownership Experience And Governance Models -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ 8
Section 2: Selection -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ 9
Section 3: Deployment -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ 10
Section 4: Adoption -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ 10
Section 5: Optimization -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ 11
Section 6: Renewal-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ 12
Customer Rights Must Come With Responsibilities -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ 13
Recommendations -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ 14
Put The Best Practices From SaaSBoR To Use Across The Organization -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ 14
Resources -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ 15
Community-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ 15
About Altimeter Group -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ 15
Footnotes -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ 15


Published by Altimeter Group, LLC. | 1855 South Grant Street, Suite 100 | San
Mateo, CA 94402
Customer Bill Of Rights: Software-as-a-Service 3
Ecosystem Input
The Customer Bill of Rights: Software-‐as-‐a-‐Service (SaaS) report could not have been produced
without the generous input from some of the leading market influencers and the following
vendors who have shown a keen interest in transforming the client-‐vendor relationship. Please
keep in mind; input into this document does not represent a complete endorsement of these
rights in total by the individuals or vendors listed in this report.
Influencer Input
Nenshad Bardoliwalla Paul Greenberg, The 56 Group
Naomi Bloom, Bloom and Wallace James Governor, Red Monk
Kevin Dobbs, Montclair Advisors Erin Kinikin
Bob Evans, TechWeb Esteban Kolsky
Dennis Howlett, Enterprise Irregulars Michael Krigsman, Asuret
Phil Fersht, Horses For Sources Frank Scavo, Computer Economics
Christian Gherorghe Josh Weinberger, CRM Magazine
Vendor Input
Agresso Informatica Pervasive Software
Appiro Infosys RightNow Technologies
Boomi Intacct Rimini Street
Blue Wolf Intuit Salesforce.com
Cisco Systems Jive Software SAP
CODA KickApps SocialText
Demand Media Lithium SoftBrands
Epicor M-‐Factor SuccessFactors
Everest Software Microsoft Sugar CRM
Flexera Mzinga Telligent
GetSatisfaction NetSuite Tenrox
HelpStream Oracle Ultimate Software
IBM Panaya Inc UserVoice
Infor Patni VMWare
Workday


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Customer Bill Of Rights: Software-As-A-Service
Purpose And Intent

This document is intended to serve as a reference, checklist, and point of discussion with SaaS
vendors for prospects and clients who have made the decision to begin a SaaS deployment.
Though your SaaS vendor may not provide all these rights today, these represent the best
practices in over 250 SaaS contracts and the general spirit and intent of most SaaS vendor’s
executive management teams.
Executive Summary
SaaS deployments have entered the heart of the business and now deserve to be treated with
all the rigor and due diligence of on-‐premise licensed software. Client – vendor relationships in
SaaS are perpetual and it is imperative that these agreements provide a chance for a new slate.
CIO’s, CMO’s, LOB execs, procurement managers, and other organizational leads should ensure
that the mistakes they made in licensed software aren't blindly carried over. The SaaS Bill of
Rights (SaaSBoR) provides a tool for clients and vendors to change the tenor of contract
negotiations from subservient user to equal and collaborative partnership.
Cost Transformation Drives Mainstream SaaS Adoption

Organizations saddled with cost pressures, rigidity of existing legacy systems, flood of business
requests for changes, and impending regulatory and compliance burdens, now turn to
software-‐as-‐a-‐service (SaaS) as a deployment option and business model to bring immediate
value to their organizations. In fact -‐-‐ multiple research surveys show an estimated 35% to 45%
of companies considering, piloting, and/or adopting SaaS solutions in the organizationi. In
emerging markets, organizations have chosen SaaS as a way to leapfrog legacy deployment
options.

However, SaaS should not be seen as anything new to the enterprise. Many consumer
solutions and Web 2.0 social technologies such as SocialText, LinkedIn, FaceBook, Twitter,
Gmail, and YouSendIt have already been put to use inside organizations, often without the
advisement from IT departments. This groundswell of user driven consumer tech initiatives has
quietly permeated and benefited many organizations. As the shift from consumer tech to
enterprise class SaaS solutions continues, organizations should consider seven key benefits of
moving to SaaS over on-‐premise (see Figure 1):


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Figure 1. SaaS Deployment Delivers 7 Key Benefits

Source: Altimeter Group September 2009 SaaS Benefits Survey of 91 end user clients and vendors.

1. Richer user experience and user productivity. Newer technologies enable more engaging and
easy-‐to-‐use interfaces. Solutions often designed with a role based perspective in mind result in
minimal training.ii
2. Rapid IT implementation and optional higher quality deployment. The duration of the
technical implementation phase moves from months to weeks. Customers can demo a product,
move to sandbox, and train in days. Organizations now have the option to redirect their
budgets and resources to improve business process and configuration instead of fighting
integration and deployment quagmires. True SaaS solutions do not require individual installs,
instead they leverage the SaaS environment.
3. More frequent cycles of innovation. SaaS vendors update their solution between 2 to 4 times a
year. With current Agile development methodologies, some vendors iterate in months.
Customers gain access to latest features, bug fixes, and regulatory updates at a quicker pace. In
many cases, organizations turn to SaaS to access innovation and capabilities not provided by
incumbent on-‐premise vendors.
4. Minimal upgrade hassles. Users no longer have to worry about a flurry of bug patches, fixes,
and the endless testing cycles required to validate changes. Business processes impacted by
regulatory changes such as financial closing and hire to retire benefit the most from easier
consumption of updates.

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5. Access to the “always-‐on” SaaS tools regardless of location. Office workers can now access
these SaaS tools anywhere they go. These consumer tools often have rich mobile experiences –
often far ahead than providers in the on-‐premise space.

6. Subscription pricing. SaaS solutions have adopted subscription or utility pricing to spread out
payments over time. The shift from capital expenditure (CapEx) to operational expenditure
(OpEx) frees up funds for other projects. Business users can swipe and buy without going
through complicated procurement processes. During recessionary times, subscribers only buy
what they consume, stretching their investment. Many contract terms have also moved from
yearly to monthly increments.
7. Anytime scalability and dynamic capacity. Scalability enables customers to streamline cost per
additional user. Clients can flex-‐up or flex-‐down on usage without incurring spikes in variable
costs such as hardware, staffing resources, and license costs.
SaaS Licensee’s Rights Must Reflect Unique Business

Model Considerations
With increased SaaS adoption, organizations must consider broader implications and
expectations of the SaaS client-‐vendor relationship. Building long-‐term win-‐win relationships
with SaaS vendors differs from the on-‐premise world for a three key reasons:

• Issues related to software license rights. In true multi-‐tenancy, SaaS vendors own the core
code and licensees own the data and metadata. Clients must assess exit strategies. What
happens if the vendor goes out of business? What’s happens when the vendor is acquired by a
competitor? What do you do to make the data useful without context? How do you prevent
lock-‐in? Can you buy the data models and logical models?
• Vendor commitment to significant product investment. Pace of innovation remains rapid
today but there are no guarantees on what to expect in future levels of investment. With
frequency ranges from 2 to 4 times a year, what protections do clients have for future
investment levels? Will vendors attempt to charge for “new” modules that represent
extensions of existing capability? How does the buyer provide input into future product
roadmaps?
• Client remedies for breaches in service level agreements. Despite all backups and contingency
plans, clients should consider scenarios where core business systems may go down. What are
fair remedies? How are systems backed-‐up? What will be done during disaster recovery? How
much liability the vendor will provide?


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SAAS Bill of Rights Span a Continuous

Ownership Lifecycle
SaaS shifts ownership from perpetual licenses to perpetual usage. In fairness, vendors should
expect a minimum standard of respectful, sincere, and earnest clients. Users must consider the
implications of perpetual usage and relationship. These SaaS Bill of Rights represent a client-‐
focused perspective of what vendors should provide as 37 basic rights. Five key phases across
the SaaS ownership life cycle include (see Figure 2):

Figure 2. SaaS Ownership Experience Spans A Five-‐Phased Lifecycle

Source: Altimeter Group


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Section 1: Ownership Experience And Governance Models

The SaaS ownership experience parallels similar elements of outsourcing. To start,
organizations hand control over business processes to a third party solution/service provider.
Hence, clients should take the time to design the appropriate levels of governance to achieve a
mutually beneficial ownership experience. Client rights that emphasize the client-‐vendor
relationship include:

• Vendor executive advocacy and accountability. In the consumer space, this may result in
management team accountability for customer success. At higher price points, organizations
can expect to know which executives take responsibility for customer satisfaction and advocacy.
Escalation processes should be defined upfront. Product and sales accountability should be tied
to specific individuals and customer satisfaction should be tied to compensation metrics.
• Timely and meaningful interactions. Vendors and their partners should guarantee timely
response times for key issues such as service requests, bug fixes, and help desk issues. Key
policy changes such as product road map decisions, organizational and personnel moves,
support policies, and licensing and pricing should be communicated in a timely fashion to
customers and tracked by the vendor. Vendors should provide a complete picture of the overall
interaction history.
• Professional customer relations. Courtesy and respect across all customer touch points should
be the norm from not only front line customer facing personnel, but also back office employees.
Vendors should keep all contract details confidential and private unless permission has been
granted. Professionalism also includes the right to work with knowledgeable and trained
resources.
• Quality guarantees and remuneration. Customers should expect that vendors to stand behind
the quality of both their products and services. This includes full disclosure of known and
potential defects that relate to performance, availability, bugs, integration, and partner solution
compatibility. Penalties for breaches should reflect the business impact of a disruption or
inability to access a capability promised to a customer. Customers should be able to choose the
format of remuneration. Vendors should be able to place mutually agreed limits on liability.
• Ownership of and access to data with no questions asked. Customers should know that they
own all their data and have access to this data at all times throughout the relationship. Tools to
access data should be provided to clients. Vendors should build from this customer centric
design point.
• Ongoing Transparency. For critical applications, clients should be given insight into the vendor’s
long-‐term viability (i.e. financing, operational condition, etc.), regardless of whether the vendor
is publicly or privately-‐owned. Transparency rights include access on a periodic basis to the
vendor’s financial statements along with insight into the vendor’s operational performance in
areas such as incident and problem management, security management, and business
continuity planning. Transparency allows customers to develop risk management scenarios
based on the vendor’s actual financial and operational condition, giving customers the necessary
time to migrate to a new service provider if appropriate.


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Section 2: Selection

Selection describes the rights prospects and clients should expect from software vendors as
they make their decision on a product and vendor. Prospects and clients should have a right to:

• Include an entire agreement clause. Prospects and clients should ensure that demos,
proposals, and promises made during the selection process are included in the final contract.
Vendors should expect clients to include documentation as exhibits in contracts.
• Try before buying. Prospects and clients should be given access to the system and provided a
sandbox to demonstrate the system. Vendors should retain the right to charge for the proof of
concept as appropriate.
• Access licensing and pricing terms and conditions. Pricing metrics, discounting criteria, and
terms and conditions should be provided upfront to all customers. Prospects should receive
updates and alerts when changes are made. Terms around user and usage metrics should be
made clear. Standard contracts and renewal provisions should be made available for review.
• Provide a TCO analysis of SaaS during the sales cycle. Vendors should be able to show the true
cost of ownership over a defined period of time. Key metrics should show comparisons of
deployment options over 5, 7, and 10-‐year time frames.
• Obtain clear policies on storage costs. SaaS clients often find out after-‐the-‐fact that the storage
allocations do not meet actual usage requirements. Once hooked onto the product, on-‐going
storage costs could prove to be the largest expense item. Clients should negotiate these terms
in advance and seek pricing plans from vendors.
• Receive disclosure about solution defects. Customers and prospects should be given access to
a list of known bugs, integration, performance, and deficiencies. This should include incomplete
business process flows or scenarios where use case scenarios cannot be completed.
• Understand system configuration and architecture. Clients should receive details about the
hardware architecture. Key areas to detail include hardware, processing approach, operating
system, and configuration and customization process. Other areas for disclosure include
processing pipelines, batch processing, queuing, and system monitoring methodologies.
• Stipulate data management requirements. Clients should determine data properties including
physical location, security mechanisms, access rights, disaster issues, and regulatory compliance.
Critical information such as host info and availability should be provided. Location of the cloud
may play a role in selection.
• Reach out to customer and partner references. Clients should expect a vendor to provide
customer references for unfettered conversations about the solution. Clients should also be
able to reach out to user group leaders for honest and candid discussions.
• Perform due diligence on a vendor. Prospects should be able to examine a SaaS vendor’s
financial viability, security risks, and legal liability. Key areas should include financial
performance, legal risks, management team background, customer lists, and SAS 70 compliance.
Clients should have the right to review SAS 70 certification results; and conduct or have third
party auditors perform regular audits of the vendor data center.


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• Contract third party advice. Clients should retain the right to engage a third party advisor in
vendor selection, contract negotiations, and independent verification and validation (IV&V).
Vendors should not try to prevent clients from seeking such advice.

Section 3: Deployment

Deployment describes the rights clients should expect from software vendors as they
implement and consume the technology. Rights should include:

• Support multiple implementation options. Clients should be given a choice as to whether they
can self-‐deploy, choose a trained third party partner, or work with the vendor. Selected partners
should be able to obtain access to key data and implementation information. In cases where no
partner exists, clients should have the option to self-‐implement with vendor/partner assistance.
• Receiving a clear statement of work and project status reporting. Vendors should deliver large
projects in accordance with project management best practices such as the Project
Management Body of Knowledge (PMBOK). Smaller projects should follow clearly defined
templates for rapid implementation. Deliverables, milestones, acceptance criteria, and
escalation processes should be documented prior to project kick-‐off. The implementation
teams should provide service level agreements (SLAs).
• Contracting vendor expertise. Customers should have the right to engage vendor experts such
as product development teams, solution architects, training, and support personnel at
reasonable rates. Assess the team on their technical acumen. Examine how consultants are
trained, how product teams and consultants collaborate, and how they address challenging
projects. Fees should be provided in advance. Detailed information should include personnel
rates and estimated effort for common projects.
• Accessing training programs. Vendor should provide access to training programs to ensure a
client or their partner could complete a deployment. More importantly, clients should expect
adequate knowledge transfer activities from the vendor to ensure self-‐sufficiency.
Section 4: Adoption

Adoption describes the rights clients should expect from software vendors as they utilize the
solution across the organization. Vendors should provide clients with the following rights:

• Freedom of speech. Clients should not be limited in discussing the solution with fellow
customers, peers, or media. Clients should be able to freely discuss issues with the software
including but not limited to security issues, bugs, and pricing. Clients should not be limited to no
disparagement clauses. Both sides should be open in their communication.
• License equivalency. Clients of on-‐premise software vendors moving to SaaS and other on-‐
demand models should be given the right to convert user and usage models across different
deployment options. Equivalency ratios should be determined ahead of time.
• Intellectual property (IP) indemnification. Vendors faced with lawsuits will provide clients with
indemnification from IP legal claims. Remedies should include refund of the subscription costs,
provision of a replacement solution at zero cost, and vendor developed solution.


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• Software escrows. Clients should expect vendors to provide the option to access a competitive
provider of their choice who serve as custodians for source code, user data, application
executables, and related documentation. Mutual agreement should be determined on
frequency of backups and updates. Hot backups should be made available for disaster recovery
scenarios. Vendors reserve the right to charge for software escrows.
• Integration and API support. As organizations make the shift from on-‐premise to cloud-‐based
deployment options, vendors must deliver key access to public API’s, web services, and other
integration tools to support hybrid deployment. In some cases, integration will revolve around
business processes such as order to cash, campaign to lead, and incident to resolution.
• Data quality support. While a vendor cannot guarantee the quality of data being put into the
system, tools should be provided to address both a sourcing and day-‐to-‐day processing
perspective. These tools ensure short-‐term and long term efficient processing.
Section 5: Optimization

Usage optimization describes the rights customers should expect from software vendors as
they change how they expand, maintain, or contract in their usage of the solution. Customers
should expect:
• Price protection options. Clients and prospects should be given the opportunity to lock-‐in
increased consumption guarantees or seek price increase protection. Vendors should provide
the discount rationale and clearly state the pricing bands for each bulk increment. Clients
should be able to move between bands at defined periods of time. One option – provide for a
collar where user counts can fluctuate up or down by 25% over six months or a year at the same
unit price. Vendors should be able to set minimums.
• Affiliate usage assignment. Customers should be able to provide access and usage of the
software to majority owned affiliates. Customers and vendors should determine how to treat
usage assignment with other related organizations.
• M&A scenarios. Clients should be given the option to combine contracts to achieve higher
discount levels or tiers during mergers and acquisitions. In cases where the software will no
longer be use, limited access licenses should be provided to access pre-‐merger files, compliance
requirements, or historical trending data. SaaS vendors should provide an option for clients to
flex-‐down usage or terminate during divestitures. Vendors may also provide an option to apply
credits to the new entity.
• Multiple support options. Customers should be given more than one-‐size fits all support
options. Options should provide tiering in pricing and service levels that correspond to actual
usage.
• Install base transparency. Vendors should inform customers when multiple installations have
been deployed at a company. Clients should be able to access information about usage by
users to determine if they’ve purchased shelf ware.
• On-‐going performance metrics. Clients should expect a trust site to monitor service level
agreements. Vendors should provide at least a monthly report on key availability and
continuity metrics.



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Section 6: Renewal

Revision describes the rights clients should expect from software vendors as they shift their
usage requirements and change how they adopt SaaS solutions. At a minimum, clients should
expect rights to:

• Provide input into future capabilities. Vendors should provide input mechanism for
requirements prioritization. Prioritization and acceptance criteria for roadmap decisions should
be made open to clients. Clients should understand that vendors might reserve a portion of
investment decisions for platform upgrades and updates. Vendors should provide confirmation
and status on feature requests.
• Give ample notice before deployment. Vendors should give customers ample time (e.g. 30, 60,
and 90 days) to prepare for an upgrade. This includes keeping the lines of communication open,
preparing the appropriate training materials, providing guidance on testing, and working with
end users on implementation risks and impacts.
• Transition to alternative deployment options. Vendors with multiple deployment options for
similar code lines should provide mechanisms for clients to transition among the different
options. At no time should a client be locked in to one deployment option. Pricing options
should reflect a comparable total account value. Client should be able to access full data at any
given time, no questions asked. Vendors should provide both public and private access to APIs
to support transitions.
• Determine termination criteria. Both clients and software vendor should communicate clear
termination criteria. Termination criteria should also include transition language and migration
assistance conditions for impacted clients. Regardless of the contract, the customer should
always own their data and have the opportunity to migrate it. Acquisition should be listed as
one example of acceptable termination criteria.
• Receive migration assistance. Customers leaving a SaaS provider should be provided with the
necessary transition tools to ensure business continuity. Tools could include temporary hosting
privileges, integration frameworks, data migration, and historical archive capabilities. These
costs should be determined during the selection process.
• Purchase the source code. In some cases, clients may leave a SaaS vendor and require more
than just the flat file extract of their data. Some vendors in the past have allowed clients to
purchase the semantics of the data. Key items would include business rules that govern the
data structures within which the data is stored, data models, and logical models.



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Customer Rights Must Come With Responsibilities

SaaS provides an opportunity for clients and vendors to rethink their relationships. Vendors
give up some of the mystique of software contract negotiations with an open Customer Bill of
Rights. An open and collaborative approach will lead to a more amiable and long-‐term
approach to the client-‐vendor relationship. However, clients must take actions and
responsibility to keep their rights by:
• Ensuring adequate client side resources to succeed in deployment. Clients must bring to the
table executive sponsorship, adequate funding, appropriate resourcing, and strong project
management. In cases where clients decide to self-‐implement, they should have the vendor or
third party assess their capabilities to collaborate towards a successful implementation.
• Paying invoices on time and in full. SaaS vendors deliver solutions 24/7. As with utilities, they
will not immediately turn off service for late payment. However, clients should pay invoices on
time if they expect their SaaS vendors to keep the lights on and stay in business.
• Partnering with their vendors to ensure their long-‐term viability. Clients can add complexity
and cost into the cycle when they try to prove how smart they are during contract negotiation.
Excessive use of large penalties, price caps, and other "you can't fool me" items often create an
adversarial relationship right from day one. Clients should hold to their rights and objectives but
keep in mind the potential long-‐term nature of SaaS relationships.
• Maintaining ongoing communication. Clients often expect SaaS vendors to respond
immediately to requests. Clients should also respond to SaaS vendors in a timely manner. If an
issue is addressed, clients should communicate whether or not the solution succeeded or failed.
Clients should anoint a dedicated resource to maintain this level of dialogue with the vendor.
• Acknowledging changes in scope. Customers need to accept responsibility for major changes in
scope that differ from an initial product and implementation plan. Clients should review
changes and compensate vendors for changes that materially impact delivery dates, resource
allocation, and overall cost.
• Serving as a client reference. Clients should be open to share honest feedback with prospects
and other clients about their experiences with the solution and the vendor. Where possible,
clients should engage in the ecosystem by taking a reasonable number of press calls, prospect
calls, and speaking opportunities. Vendors should not abuse this privilege.
• Providing feedback into product roadmaps. When given the opportunity, clients should take
the time to provide input into the future direction of products, markets, and other investments.
Clients should help shape the direction of how that feedback is defined and provide input on the
success or failure of that solution.


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Recommendations
Put The Best Practices From SaaSBoR To Use Across The
Organization
While SaaS may appear to be a short-‐term fix to the lack of timely innovation and ownership
expense structure brought on by many on-‐premise vendors, organizations should view this as
key pillar in their overall enterprise strategy. The proliferation of SaaS deployments will require
CIO’s, business leaders, and sourcing and vendor management teams to work more closely with
each other to deliver flexible guidelines in the adoption of SaaS solutions. Consequently, the
Altimeter Group suggests the following:
• Use the SaaS Bill of Rights to bring IT and business teams together. Walk through the best
practices to establish future SaaS procurement policies. CIO’s can give use the SaaS Bill of
Rights to establish frameworks for business units to speed up the vendor selection process.
• Include the SaaS Bill of Rights in SaaS evaluation and selection criteria. Utilize the rights
as a starting point in establishing a long term, productive client –vendor relationship. The
SaaS Bill of Rights should be a starting point for discussions. Clients should also keep in
mind their responsibilities as a client in the relationship
• Expand the rights to meet organizational requirements. The SaaS Bill of Rights provides a
starting point for your contract negotiations and establishment of a long-‐term client-‐vendor
relationship. Organizations should expand on rights that apply to specific industries,
geographies, and regulatory conditions.
• Join the SaaS Bill of Rights ecosystem. Altimeter Group has put together a series of
community tools including a linked in group to continue the discussion. New rights, your
experiences, and feedback can be contributed on the SaaS User’s Bill of Rights.


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Resources
Community
Join the Customer Bill of Rights ecosystem. Altimeter Group will be continuing the discussion
via webinars, social conversations, and events.

LinkedIn: http://www.linkedin.com/groups?home=&gid=2322509&trk=anet_ug_hm
http://bit.ly/ctuGL

Twitter Hashtags
#SaaSBoR
http://twitter.com/#search?q=SaaSBoR

About Altimeter Group
Altimeter Group is a strategy consulting firm that provide a pragmatic approach to emerging
technologies to companies. We have four areas of focus: leadership and management,
customer strategy, enterprise strategy, and innovation and practice

Footnotes

i Saugatuck Technology, Gartner Group, IDC, and Forrester have shown similar SaaS adoption rates in 2009 research
reports and surveys.
ii Ten elements drive the move to more social enterprise apps. Many SaaS vendors already exhibit these qualities. View
the August 24th, 2009 blog post “Monday’s Musings: 10 Essential Elements For Social Enterprise Apps”
http://bit.ly/130WiO



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October 12, 2009

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Customer Bill Of Rights: Software-As-A-Service

Purpose And Intent

Cost Transformation Drives Mainstream SaaS Adoption

SaaS Licensee’s Rights Must Reflect Unique Business

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SAAS Bill of Rights Span a Continuous

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Section 2: Selection

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Section 3: Deployment

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Section 6: Renewal

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Customer Rights Must Come With Responsibilities

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