The Path to Software-as-a-Service Success

Thursday Dec 27th 2007 by Sandra Gittlen
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Citing real world experience, three executives weigh in on the benefits of SAAS – and warn how to avoid pitfalls.

As enterprises large and small ramp up deployment of new applications to employees, business partners and customers, they are feeling the pressure to outsource software delivery to best-of-breed providers rather than develop and manage solutions in-house.

Such an approach has its advantages. “SaaS providers have individuals on staff who are dedicated to making sure a single application has 100% uptime as opposed to someone in-house who has to juggle multiple applications and other IT tasks,” says Douglas Menefee, CIO at The Schumacher Group Emergency Medical Solutions in Lafayette, La. “They are also able to roll out updates with new features on a quarterly basis. In some ways, that makes a SaaS provider more reliable than my own data center.”

Before you head down this path, check out the lessons from three of your peers below who have already charted the SaaS waters for you.

Name: Douglas Menefee

Title: CIO

Company: The Schumacher Group Emergency Medical Solutions

Location: Lafayette, La.

Challenge: “We’re a 13-year-old company that provides emergency room services, such as physician recruitment, scheduling and compensation to 150 hospitals across the country. Although we only have 650 employees, with our physician consultants we are a 3,000-person organization and have an annual growth rate of 20 percent to 30 percent. We had a home-grown database that managed all our customer relationships but it wasn’t the ideal solution for our organization. For instance, workers in our regional offices are always on the road and need mobile access to the database. At the time we decided to look for a new solution, Hurricanes Rita and Katrina hit the area and we realized we needed to address business continuity as well.”

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Solution: “Two years ago, we decided to go with salesforce.com’s on-demand customer relationship management solution rather than trying to build or buy something for in-house. Today, we have 230 users on the system and plan to increase that soon.”

Impact on IT: “This was very much a ‘we build it and we own it’ culture when I came on board three years ago. However, with on-premise applications, I needed an army of individuals just to keep them running. I wanted to move to an environment of architects, not builders. And we did experience a large turnover within the department after we went to SaaS. But one of the main reasons we went with the SaaS model was to give our IT professionals a chance to be innovative instead of just doing maintenance on in-house systems. Now they get to focus on maximizing what we can do with applications and making them more streamlined and efficient for end users.”

SLA advice: “Make sure you communicate regularly with your contacts at your service provider to review your service-level agreement. Salesforce.com has a success manager that we meet with on a quarterly basis. Also, look for a model that ensures they want to keep you happy. For instance, my success manager’s compensation is tied to retaining me as a client and expanding my user base.”

Contingency plans: “Although we do have an SLA that covers outages and disruptions, my No. 1 worry is if salesforce.com gets acquired and I have to deal with management changes or service interruptions. It wasn’t possible to add that possibility into the contract… so we created our own plans that if anything does happen, we can temporarily work offline.”

Final thought: “The big thing to remember is that SaaS doesn’t solve bad processes. We tried on a couple of occasions to try to make services work instead of doing what we needed to do. Instead you have to use SaaS as a catalyst to change and improve your processes.”

Name: Ken Harris

Title: CIO

Company: Shaklee Corp.

Location: Pleasanton, Calif.

Challenge: “Shaklee is a rapidly growing mid-market company that sells premium quality, natural nutrition, and personal care products, environmentally-friendly household products, and state-of-the-art air and water treatment systems. When I came onboard three years ago, one of my tasks was to see how technology, which was mostly legacy, could support a strategic shift. I have a smaller budget than most larger organizations, yet still have the same breadth of services I need to cover, and I had to find a way to be a lot more efficient with the money I spend to support these needs.”

Solution: “I mapped out our business and then color-coded each area based on the condition of the technology. It became clear where we needed to make technology investments fast. For instance, we were spending a lot of money in product returns due to incorrect addresses. So we replaced our in-house address verification system with a SaaS offering from StrikeIron, Inc. that connected into all of our databases. That enabled us to get our feet wet and see immediate benefits. Even though we pay an annual fee, we’ve saved three to four times that annual payment by avoiding supply chain and shipping costs for returns. We also have SaaS providers for our data warehouse and Web site search and analytics.”

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Impact on IT: “There’s a whole cultural thing you need to go through. Your internal skill set changes from purely focusing on technology to understanding business, analytics and project management. I’ve never been in an IT role where there hasn’t been more work than people and money needed to do it. You have to help your staff understand that IT will get kudos if they are able to provide better service to their users.”

SLA advice: “Start off with top-to-top discussions and establish an open line of communications. You have to be able to say that if something happens, we can access each other and get something done. I don’t sign an agreement until I’m comfortable that will happen.”

Contingency plans: “Whenever we look to structure a SaaS-based relationship, we do contingency planning that addresses what happens if the vendor doesn’t deliver the application or doesn’t stay in business. If we can’t put together a decent alternative, then we don’t go through with the deal.”

Final thought: “Most vendors have a problem making a commitment ensuring 100% uptime, but I have a problem if they don’t. I put detailed specificity with incentives for meeting and penalties for missing six nines of availability and capability into all my SLAs. Until they carry the same level of responsibility I have to carry, it won’t work.”

Name: Mike Murphy

Title: Senior Manager Online Support

Company: EarthLink, Inc.

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Location: Atlanta

Challenge: “We used to do a lot of in-house development for projects among our more than 2,000 employees. Organizationally we had so many different groups with stakes in different tools that needed to be developed that lead times were excessively long. That process also required a lot of infrastructure, or capital expenditure, and the layers of complexity were exhaustive. We’d try to develop home-grown versions of tools that other companies had as their core competency. For instance, we were going to try to build a chat program for the support and sales teams to interact with their clients.”

Solution: “Because chat is such an important piece of our business, we signed on with LivePerson, Inc.’s software as a service. We’re handling a quarter of our contacts – more than 2 million transactions a year – through this channel and we need to deliver a polished product. Our sales team uses it to close sales with customers browsing the Web and our support team uses it to help customers solve problems.”

Impact on IT: “Software as a service tends to live more in the business unit than IT. It’s attractive to me as a business owner to go with an outside vendor who is beholden to me. There’s more incentive there than going with an internal group that may not have the same priorities. However, I do work closely with IT because they have direct access to Web properties where we need to deploy code.”

SLA advice: “Be very specific about information access on both sides. We continue to add layers of stipulations to improve security, such as when a session ends, all information is scrubbed of sensitive information.”

Contingency plans: “The best way to plan for contingencies is to keep an open mind and not get locked into one vendor. Our providers know that we are constantly re-evaluating our relationships and we make sure to take a look at new services on the market. That way, if our provider shuttered its doors, we’d know who to call to get back up and running within weeks.”

Final thought: “I’m a huge advocate of reaching out to industry organizations and going to conferences to find peers that have already reviewed potential service providers. That way you can learn what they did right and wrong. So far it has saved us a lot of time and gotten us the right vendors and the right deployment.”

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