SaaS (software as a service) permeates our lives and businesses. Do you use Dropbox to share files? Have you played around with various to-do list apps? (try TeuxDeux; it’s my favorite). Utilize a point-of-sale system for taking payments from customers? Pay for Evernote Premium? You’re a customer of SaaS vendors. Not all vendors are huge faceless entities. Small specialty software firms may provide you or your business with a product that will require fairly constant interaction between vendor and customer: reporting bugs, requesting configuration changes, or new functionality requests. You may someday find yourself in a position to choose between software vendors offering similar services. The process of choosing a vendor might seem harrowing, and I am writing today to lend some insight to help. No matter your industry, my aim is to help you choose a tech provider you’ll be able to live with (and perhaps even enjoy working with).
Why might my observations be useful? I’ve thought a lot about this for the past five or so years…
Thanks to a dramatic and sudden restructuring of my then-employer, in mid-2008 I found myself largely responsible for managing the technology component of that organization. Having no experience aside from being a mere end user of software before that time, my duties consisted mostly of learning how to coherently report bugs and more urgently, how to successfully pester my account executive at our SaaS provider to fix said bugs. I got to know managers at other organizations who used the same software provider and learned on the fly about managing user groups, writing specs, and how to describe a business problem. Things were not rosy: tension characterized the customers’ interactions with the software vendor: miscommunications, unhappiness about growing bug lists or untended feature requests, and there was an excess of pessimism bordering on mistrust.
A couple years and jobs later I wound up working for the same software vendor I was once a customer of. Because of my history, a constant tenet of my job was to foster productive and positive communication with licensees of the software. The tension with customers was still there, but of course now I saw it from the vendor’s perspective: urgent requests for complex features for projects that were tangential to customers’ core businesses, borderline-trivial bugs eliciting panic, and unmet [unrealistic] expectations from both sides. Despite my efforts that lingering pessimism characterized many interactions.
As Sandra mentioned on Monday, lots of collaboration takes place between parties regarding car sharing technology. Through my interactions with colleagues, customers, and other technology partners and a lot of soul-searching, I’ve slowly come to identify the root of this problem:
Misaligned business values between customer and vendor.
It’s as simple as that. Not easy to fix, but simple to express.
By misaligned values, I mean the really big picture. How can the customer/licensee successfully pick a SaaS vendor with whom they’ll not constantly engage in a power struggle? How can software vendors seek out customers who will happily use their software and provide the constructive feedback that is needed? I believe this has absolutely nothing to do with the software itself, outside of the most macro and obvious factors.
What to look for?
Risk tolerance in this context is the balance of innovation versus stability. This can also be described as tolerance for discomfort. Would you prefer that functionality stays the same and keeps working in the way you expect it to? Or would you trade more frequent bugs or down time in exchange for frequent new features? There’s a reason why software in some industries is not dynamic. Some banking mainframes haven’t changed much since the 1980s because the risk of new functions possibly failing is far greater than the improvements those new functions will deliver. Here’s another example from the health insurance industry. Generally, a conservative and slower-moving organization will not work well with a dynamic and quick-acting organization. There’s no right answer for this trade-off; know your boundaries and communicate them!
The vendor’s service philosophy will affect your organization every day. In my opinion, this goes far beyond SLAs (support level agreements) and is more about the vendor’s attitude toward licensees. Does your organization need a lot of configuration changes (perhaps for marketing purposes)? Does your pricing fluctuate seasonally or even more frequently? Are you not very tech-savvy and find that you have a lot of technical questions about the product you’ve licensed? With a patient and customer-focused technical support team, it’ll be a pleasure to contact your vendor, not a chore.
Exit strategy talk is tricky to navigate. Organizations generally won’t go shouting their buyout aspirations when looking to pen a new contract with a vendor or licensee. It costs vendors and licensees a lot of money and time if their partner is bought out before the contract terms are up. This might be obvious advice, but don’t allow your contract expiration date to pass and move you to month-to-month if you’re looking to continue business as usual. Write in clauses that provide for your financial stability in case of a buyout. In short: if you are unsure of your negotiating partner’s intentions but otherwise would like to do business with them, ensure you protect yourself with appropriate negotiation goals.
This post has been perhaps overly focused on mitigating the negative aspects of business partnerships. Something simple and positive that all parties should keep in mind: for the most part, everyone simply wants to do a good job at their work. Rarely does anyone come to their partners with purposeful gall or desire to be difficult, though if it happens a few times it’s easy to fall into the rut of negativity. Whenever possible, pick up the phone or open your video editor of choice and have a real conversation about the issue with your vendor or customer. Chances are they’ll be glad to talk and truly collaborate with you to solve the problem.
What else would you suggest in evaluating a new business partner?
