Companies must make sure that they get adequate protection under contracts signed
with providers of hosted software, said users at Computerworld's SaaSCon conference
last week. IT managers must also make sure that the provider will be around
for the long-term, they suggested.

As an experienced hosted software user, Ken Harris, senior vice-president and
CIO of Shaklee Corp., a Pleasanton, Calif., health food provider, said that
IT managers must carefully consider the financial viability and technical capabilities
of a hosted software vendor before signing on the dotted line.

"You clearly want to have some discussion beforehand, and if necessary,"
include a provision on what happens if the buyer or vendor is sold, said Harris.

Harris suggested buyers of software-as-a-service (SaaS) products incorporate
a clause requiring at least a 60-day notice of termination to resolve any support,
application and system configuration issues.

He also noted that agreements with hosted software providers include specific
data on: system availability; transaction response time; error resolution time;
disaster recovery; and ongoing system enhancement and maintenance. "When
I move to a SaaS-based relationship, I cannot just assume that any problems
will go away or a desired service will be performed. You need this in agreement,"
he remarked.

During his career Harris has used hosted Web analytics, online knowledge database,
data warehousing, search and network management software.

Liz Herbert, analyst at Forrester Research Inc. said that CIOs and business
executives must make sure that contracts with hosted software providers include
provisions for accessing data at any time for ongoing reporting and integration
needs and provisions for terminating contracts.

SaaScon attendee Karen Faire Scott, systems analyst for Camelbak Products LLC,
a Petaluma, Calif.-based maker of hydration products, said that despite some
past problems with hosted software providers, her companies is now seeking a
SaaS-based offering that can produce Oracle reports.

Scott declined to discuss the past problems or the vendors involved.

However, she noted, "The thing that would concern me is you have [a hosted
application] working well and then your vendor disappears. A customer should
have the upper hand in a SaaS relationship."

Don Green, manager of Accounting and Information Systems for Houston, Tex.-based
Texas Aromatics LP, said the petrochemical company is now evaluating looking
options for using hosted backup, disaster recovery and business continuity applications,
but wants to make sure that the contract terms meet his needs.

Green said he expects that hosted software will reduce the need for internal
technical expertise and would enable the re-purposing of IT resources, but before
signing a contract, he want to make sure that it can be terminated at any time
for cause.

"What happens to customers in case we have to get a divorce? How are we
going to transition through that?" asked Green.

Peter Quittmeyer, partner at the law firm Sutherland Asbill & Brennan LLP,
said that service level agreements can also become a thorny issue between clients
and service providers if performance expectations, enforcement terms or measurement
parameters are contractually ambiguous.

Quittmeyer stressed that hosted software customers must regularly review existing
SLA agreements with hosted providers and demand the right to "re-set"
them due to changing technology or business requirements.

» posted by abennett

Computerworld

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