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					                                       Executing an IP Protection Strategy in a
                                       SaaS ENVIRONMENT
A closer look at the Software as a Service model and how
technology escrow can help protect your subscription investment
and, potentially, your business.

B Y FR A NK B RUN O




14 ■ Contract Management / July 2006
SAAS IS A HOT TOPIC THESE DAYS AND            site. Recognizing the inherent            Assessing the Risks of SaaS
the market is taking off. SaaS—or             inefficiencies of the traditional          As companies embrace SaaS, how-
Software as a Service—is a software           software market, salesforce.com has       ever, it is critical to have clear
distribution model in which appli-            evolved and now features customer         business continuity, and disaster
cations are hosted by a vendor, or            relationship management, and              recovery plans in place. As with
service provider, and made available          sales force automation applications.      anything, there are glitches with
to customers via a network, typically         In addition, NetSuite, Inc., offers       on-demand models. SaaS providers
the Internet. Rising at a compound            enterprise resource planning              have been known to go offline with
annual growth rate of 28 percent,             applications. Providers of SaaS are       outages lasting several hours, leaving
according to a study by market ana-           able to minimize the time, effort and     customers in the dark. Customers
lyst IDC, a subsidiary of International       costs that users typically have for       also need to make sure Web-based
Data Group, predicts the SaaS mar-            installing applications and keeping       security measures are in place to
ket will reach $8 billion by 2007 as          them running.                             protect the company’s data, which is
the role of on-demand, and hosted                A recent survey by IT research         now online. Customers must guard
application management expands,               and consulting service Cutter             themselves, not only against tem-
and adoption accelerates.1 With the           Consortium showed SaaS gaining            porary outages, but against more
rapid growth and implementation               attention, and winning customer           severe disruptions; such as if the
of SaaS, the risks involved in letting        adoption because of its attractive        SaaS provider suddenly disappeared,
someone else host your software               combination of accelerated deploy-        or if it were no longer providing an
applications, and your proprietary            ment capabilities, and real cost          adequate level of service delivery.
information, must be assessed.                savings. “According to those in our
                                              survey who are currently using            Six Steps to SaaS Safety
The SaaS Story                                SaaS, it is meeting their expecta-        1. Can the SaaS vendor provide the
The names have changed since                  tions by generating a greater [return     support and reliability that our busi-
the early part of the decade. What            on investment] ROI than traditional       ness demands?
were once known as Application                software packages, while lower-           From the perspective of the SaaS ven-
Service Providers (ASPs) are now              ing staff support requirements, and       dor, an important key to their success
called providers of hosted solutions,         improving application reliability and     is the ability to convince potential
SaaS, On-Demand Software, and                 performance,” said Jeffrey Kaplan,        customers that their data, and the
managed services. Additionally, the           senior consultant with Cutter             ability to use it, are safely entrusted
emergence of a new generation of              Consortium’s sourcing and vendor          with the SaaS provider.
net-native, or Web-enabled, software          relationships team.2 Other highly
solutions supports the rise of the            sought after benefits provided by          2. What proactive measures can SaaS
new SaaS providers.                           SaaS include the ability to accelerate    providers take to address and allay
  In 1999, salesforce.com pioneered           the software development process,         fears, and move business forward?
the concept of delivering enterprise          and shift the focus of IT staff to more   In a SaaS environment, the SaaS
applications via a simple Web                 strategic projects.                       provider owns and operates the
                                                 A survey of 200 industry profes-       software application, maintains the
          About the Author                    sionals, who attended a recent            servers that run the application,
 FRANK BRUNO is a senior business             SaaS summit, showed about 40              and employs the people needed to
 strategist in the division of Intellectual   percent of the respondents say-           maintain the application, making this
 Property Management Services at Iron         ing they were exploring the option        a more affordable option than the
 Mountain, headquartered in Boston,           of moving over to SaaS, while 35          traditional software model. Instead of
 Massachusetts. Bruno consults with           percent said they had already initi-      purchasing the software outright via
 corporations, contract managers,             ated the process.-- Companies of          a license, users can take advantage
 developers, and intellectual property (IP)   all sizes are taking advantage of         of a subscription, or pay-as-you-go
 law professionals throughout the United      SaaS solutions. The most popular          model, and also eliminate some of
 States concerning IP management              types of business applications cur-       the costs associated with IT infra-
 best practices, including technology         rently sought by SaaS customers are       structure and staffing.
 escrow matters. He has spoken at many        Customer Relationship Management
 professional and industry events, most       (CRM), Sales Force Automation             3. Can technology escrow provide the
 recently at the NCMA World Congress          (SFA), Enterprise Resource                same benefits to users, as well as pro-
 2006. Send comments about this article       Planning (ERP), Human Resource            viders of SaaS services?
 to cm@ncmahq.org.                            Management (HRM), and Supply              The answer is yes. In fact, setting
                                              Chain Management (SCM).                   up an escrow account becomes even


                                                                                               July 2006 / Contract Management ■ 15
I P   P R O T E C T I O N       S T R AT E G Y    I N   A   S A A S   E N V I R O N M E N T



more critical when using SaaS, since
loss of support by the SaaS provider          “According to those in our survey who are
means not only the loss of the appli-
cation functionality, but access to all          currently using SaaS, it is meeting their
of the proprietary data along with it.
   Technology escrow and verification             expectations by generating a greater ROI
services have long been used in tra-             [return on investment] than traditional
ditional software licensing to protect
the licensee. Under this scenario, an            software packages, while lowering staff support
escrow agent holds a copy of the soft-
ware source code in escrow, releasing            requirements, and improving application reliability
it to the licensee in the event certain          and performance.”
release conditions are met, such as
if a developer goes out of business or                                  – Jeffrey Kaplan
fails to support the product.                                             Senior Consultant, Sourcing and Vendor
4. What differences exist between the                                     Relationships Team, Cutter Consortium
intellectual property protected in a tra-
ditional licensed software agreement
and that of a SaaS provider?                object code from the SaaS provider.       data, since it already belongs to
For starters, the deposit content           Distributing the executable could         them. However, considering the
list will differ for a SaaS model. In       cause pirating which could compro-        Recovery Time Objective (RTO),
addition to requiring the source            mise the SaaS provider’s revenue          and the Recovery Point Objective
code itself, the user should ask for        stream. In other words, object code is    (RPO) by application, you may
a copy of the object code, or “the          the equivalent to source code when it     determine that the frequency of
executable,” as well as instructions        comes to a SaaS provider.                 back-ups might be greater for mis-
on building the application produc-                                                   sion-critical applications that do not
tion environment, such as hardware          5. Consider negotiating for a “demand     run on your infrastructure.
or third-party tools, and, of course,       release”                                    Since time is of the essence in a
the most recent version of the data         A demand release is a condition that      SaaS business relationship, resolving
contained in the application, at a min-     guarantees that the user receives         these issues up front could mean the
imum, to get back up and running.           the object code, related components       difference between being back online
   Source code is the human read-           and data, upon sole request without       within days, rather than weeks—or
able version of the software. It is         delay or objection from the devel-        possibly not at all. CM
compiled into object code (also             oper. Access to the source code can       Endnotes
known as the “executable”). You             be set up in a separate account with
                                                                                      1. Jessica Sebor, “SaaS Will Increase Serving
want both in a SaaS situation               standard release conditions, since rec-
                                                                                         Size,” CRM magazine’s eweekly (March
because the licensee does not even          reating the application development
                                                                                         21, 2006), destinationCRM.com. Accessed
have object code—they have simply           environment would be of secondary            at http://destinationcrm.com/articles/
subscribed to the application as a          importance to the disaster at hand.          default.asp?ArticleID=5927&KeyWords=
service served up through the web.          The demand release negates the rami-         SaaS. Erin Traudt and Amy Konary, “Top
If the vendor goes away, the licensee       fications of going, for example, from         10 Predictions of 2006: Software as a
has nothing. This is essentially a          10 to15 days without access to your          Service, March 2006. IDC market study
disaster. Therefore, it is imperative       customer or financial data.                   available for purchase at http://www.idc.
to gain access to the object code, a                                                     com/getdoc.jsp?containerId=34872.
description of the live production          6. Conduct a disaster recovery test       2. Kaplan, Jeffrey, “SaaS Survey Shows New
environment (what equipment and             Further, when setting up an SaaS             Model Becoming Mainstream,” Cutter
other tools are necessary to run the        escrow account, a thorough disaster          Consortium Executive Update, Vol. 6,
executable) and of course, the data.        recovery test should be performed            No. 22, December 2005. Available from
You would want the object code first         on the front end to validate the             Cutter Consortium :: Special Offer: SaaS
and then the source code to con-            build instructions to ensure a quick,        Survey Shows New Model Becoming
tinue to maintain the software.             and successful redeployment of the           Mainstream.
   For the same reason that a devel-        application into production, should a     3. “SaaS is OK, but not yet Sassy,” Red
oper will not automatically provide         demand release occur. With respect           Herring, March 2, 2006. http://www.red-
source code when they license their         to the data, many companies do not           herring.com/Article.aspx?a=15941&hed=
software, do not expect a copy of the       feel that it is necessary to escrow          SaaS+is+OK%2C+but++Not+Yet+Sassy


16 ■ Contract Management / July 2006

				
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