In its second-largest acquisition, Amazon buys the company for $970 million.
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Carefully considering a proposal from a SaaS vendor also helps a retailer determine whether its business is ready for an entirely new platform or just needs a few added applications. "The lower cost of SaaS makes it an easier decision to install SaaS applications as the need arises," says Frome. "Most retailers aren't looking to replace their entire platform if the majority of it still meets their business needs."
Don't be shy
While the low cost of SaaS applications makes them highly attractive, retailers need to look under the hood before they buy. They will want to ask SaaS vendors about such performance metrics as web site up-time, page load time, and response and resolution time for reported problems.
Nor should retailers forget to ask about data security. The last thing retailers want from connecting to a SaaS vendor via the web is to open a hole in their platforms that hackers can exploit to steal customer information.
"The security question is cut and dried. Either the vendor can demonstrate their platform is secure or they can't," affirms Frome. "For most small or mid-sized retailers, a SaaS vendor can provide more security than retailers can in-house."
Security is one piece of the data puzzle. Retailers should also ask how easy it would be for them to access data about their business, how often that data is updated, and how easy the technology supplier makes it to generate reports on sales and platform performance.
"Retailers want to make certain that all the data captured by the platform can easily be extracted at any time," says OrderDynamics' Turcsanyi. "We provide a virtual database that communicates with the platform and updates every two minutes. Retailers can access it through the web to get the latest information on fulfillment, sales, inventory, who their customers are, etc."
Keep options open
Given the importance of the data gathered by the platform, retailers should not forget to ask if that information is easily portable should they decide to move their platform to another SaaS vendor or to go the licensed software route. "Retailers have a large investment in the platform, and a good SaaS vendor is willing to make sure that all of the data ports properly to a new platform should the retailer decide to switch," says Turcsanyi.
Retailers wondering what leverage they have when negotiating a contract with a SaaS vendor need to look no further than the vendor's business model. Because SaaS vendors are paid monthly they have an ongoing incentive to negotiate contract terms that not only win them business, but also deliver on those promises.
"Licensed software vendors don't have a lot of incentive to provide services beyond integration because they earn their money upfront," says Frome. "A SaaS vendor gets paid monthly, and if they want the contract to renew, they have to provide the service and support that will keep the customer happy over the long-term. There is no short-term approach in the SaaS model."
As advances in e-commerce technology push retailers to add richer features to their sites that can differentiate their brands, drive more traffic and increase conversions, the lower, fixed operating costs of SaaS platforms make them increasingly attractive. "The true value of SaaS is in the quality of the technology and the service provided," says Turcsanyi.