Transparency In The Cloud, Part III: 2 More Questions to Ask Every SaaS Provider

Apr 18, 2011 by Matt Ammerman

Continuing on the theme of Parts I and II, this article provides two more questions that all consumers of B2B SaaS should ask their providers.  While the questions in Part II were centered around providers’ ability to maintain speedy and reliable service, the remaining questions focus on their ability to be flexible in pricing and customization of their offering.

Question #1: How flexible is your pricing?

Ah yes, the custom contract.  Dangling off the salesmen’s tool belt since the dawn of selling. In the land of packaged software licensing, sales folks worked off of sales models that allowed them to play whack-a-mole until they had an offer suitable to win your business. In the subscription-based access world of online services, the process isn’t so simple. Often times, the ability of a salesperson to meet your financial requirements in both pricing and billing terms is tethered to the service’s ability to meet your business needs.  I know, it sounds silly, but allow me to use a real world example that I have been telling people about for years.

In the book Founders at Work, 37Signals partner and creator of Ruby on Rails David Heinemeier Hansson dishes on the early days of 37Signals.  Particularly of interest here is his story about how they had programmed the flagship service to bill customers on a yearly basis.  This meant that upon signup, a new customer would be invoiced for their first year of service, gain access to the application, and subsequently be billed annually for renewed access.  Just a few days before the launch of said application, their bank (read: creditor) notified them that due to lack of credit history, they were not allowed to bill on elongated terms.  They had to collect money from customers more frequently.  They delayed the launch for roughly a month while they re-engineered the application’s billing systems to allow for monthly billing cycles.  Now, the 37Signals team is a smart team, and they were able to skirt disaster and launch an incredibly successful software as a service business.

The point of re-telling this story is not to warn service providers, but to motivate end-users to ask questions about how flexible a provider can be with their pricing and billing.  Understand what your provider(s) can and cannot do with respect to charging you money. Learn about how the provider actually bills you. In a world where we’ve become accustomed to simply checking our bank accounts for charges by PayPal, make sure that your provider(s) have a way to work with you during good and bad times, and the many permutations of financial standing that happen in between.

Question #2: What if I don’t need everything you have to offer?

If you’re thinking that this sort of the same question as #1, you caught me. Almost. Feature granularity is certainly a conversation about flexibility, but from our end-user perspective it’s not the same topic as pricing and/or billing. What I’m talking about here is flexibility in application functionality. It used to be that the license you purchased dictated the features you saw; the license literally contained the knobs and switches that controlled application features. Subscription-based software as a service might mean that a provider has to give up cutting custom license terms (ok, ok, see #1). In that event, you want to be sure that the provider hasn’t tossed those knobs and switches along with their licensing mechanism.  Can the service be tuned to suit your needs? Can it be tuned to suit others’ needs without affecting your experience? Can pieces of functionality be turned on in a pinch? Can functionality be hidden from some users and not others? How quickly can new functionality be enabled?

This line of questioning serves only to avoid the dreaded “it’s not you, it’s me” conversation with a service provider who just can’t meet your needs.  At least if you ask the questions ahead of time, you enter into the union knowing precisely what the service has to offer, and whether or not it can change.

So here we are, the software as a service end-users, ready to go forth and subscribe.  I hope you feel a bit more empowered as you venture into the world of service-based software. Armed with the right questions, we have the power to shape how this all happens and get what we want out of the software companies-turned-service providers.  After all, it’s in our best interest to help make every provider we encounter a superior deliverer of software.  And don’t worry, they’re more scared of it than we are.