Top 10 SaaS traps

12.06.2006

9. Non-negotiable? One of the biggest misconceptions about SaaS agreements is that they're simple "click-wrap" contracts that aren't open to negotiation, says Cicala. Customers figure they're already saving money, so they don't press the issue. "But the licensing costs are going to catch up to you," says Cicala. The vendor essentially bundles maintenance and support costs into the contract, so it makes sense to try to negotiate the deal down.

And just as with other types of software licenses, big customers can obtain volume discounts. "If you're talking 50 seats, there might not be a lot of discounting," Mankowski says. "If you're talking 5,000 seats, then the vendor might be inclined to talk a discount."

10. Exit charges. Let's say an organization has signed a one-year contract for CRM services for 1,000 seats but wants out of the deal after nine months. In some cases, providers will hit customers with exit charges before giving them their proprietary data back, says DeSisto. He points to one vendor that has enforced a 10 percent penalty against the total value of a contract if a customer wants to cancel the deal after six months.

Or let's say a customer has a service agreement for 200 users and wants to scale back to 100 users after six months. In some cases, the vendor will try to continue charging for 200 users or force the customer to pay a penalty for scaling down to 100 users, says DeSisto. Either way, he says, it flies in the face of the so-called on-demand software model.

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