The Software as a Service (SaaS) market continues to grow and gain significance as software delivery shifts from traditional on-premise, licensed software to a cloud-based, on-demand SaaS model. Market analyst IDC forecasts that the worldwide SaaS market will grow to $53.6 billion by 2015 at a compound annual growth rate of 26.4% (1). Gartner has a slightly more conservative forecast with revenue projections of $22.1 billion by 2015, from revenues of $12.3 billion in 2011 (1). In either case, SaaS cannot be ignored.
SaaS is the largest segment of cloud computing, leading the way for other cloud-based services, such as Platform as a Service (PaaS) and Infrastructure as a Service (IaaS). Growing at almost five times faster than the software market as a whole, IDC predicts that the SaaS model will account for nearly $1 of every $6 spent on software by 2015 (1).
Small and medium businesses (SMBs) eagerly embraced SaaS, and were early adopters due to the benefits of its pay-as-you-go model and the ability to scale and upgrade. Experts believe that we are now at the tipping point for SaaS to move into enterprise organizations because many of the barriers to adoption, such as the IT department’s concerns about the security of SaaS-based applications are being addressed (1).
In this article, Iron Mountain will explore the strategic and tactical use of SaaS escrow as a way to mitigate some of the risks of SaaS and to provide for application continuity. The article will also discuss how to establish contingency plans that can be used by SaaS subscribers to establish a repeatable process to ensure companies can safely and consistently invest in the cloud.
What is SaaS Escrow?
In any SaaS relationship, subscribers must consider the possibility that their provider may go out of business, undergo unexpected, significant outages or experience other service interruptions. A SaaS escrow service is intended to enhance trust between the provider and subscribers while simultaneously minimizing risk of disruptions to business continuity.
Similar to traditional software escrow or technology escrow, critical software source code is stored with an independent third party. However, SaaS escrow protects your source code, object code, and data in a secure escrow account with a neutral third party. Some SaaS escrow services also provide continuous access to your data and standby failover services that enable recovery as a service in order to provide application continuity.
SaaS escrow can be used as a way to optimize the vendor relationship. For the SaaS subscriber, in addition to accessing source code, being able to maintain the software (bug fixes, enhancements, etc.) independently is the leverage that allows them to secure vendor commitments and garner better response times and overall customer service from the SaaS provider because the provider will never want to be cut out of the relationship.
The Crux of SaaS Enablement within the Enterprise Market
Questions about risk emerge as enterprises cautiously embrace cloud technology. There is no way to trust – beyond a shadow of a doubt – that the SaaS provider will remain a viable business long-term or that no catastrophic event beyond the provider’s control will force a prolonged outage. Obvious concerns like bankruptcy and lack of support have always been release conditions in escrows, but with SaaS applications, these are now overshadowed by concerns relative to application continuity and access to mission-critical, proprietary data. Prospective SaaS subscribers are challenged with questions addressing concerns such as:
- What contingencies exist when a subscriber cannot access the SaaS application?
- What complexities occur with respect to replicating or maintaining the provider’s live production environment?
- How hard is it to access data and is it usable without the application executable (structured versus unstructured data)?
- Would it be possible to sustain application continuity long enough to migrate to another solution?
- What is the contingency that extends beyond the provider’s disaster recover (DR) plan?
How SaaS Escrow can help overcome Risks
In light of this bourgeoning software delivery model, SaaS subscribers are still figuring out how to adequately protect their investments and mitigate risk associated with entrusting their mission-critical applications (and data) to the cloud. The use of SaaS escrow helps to overcome these risks.
The need for escrow is, of course, based on the requirements set forth by the subscribers and it depends on the perceived risk. For example, if a SaaS application is used by a small number of users and the data is not mission critical, a company might be able to adequately address the risk by getting periodic copies of the data made available for migration purposes – without the need for escrow.
On the other hand, a SaaS deployment to thousands of users, which entrusts the most mission critical data to the cloud, is a prime opportunity for the added protection of SaaS escrow. In this example, it becomes the fiduciary responsibility of the company to have contingency plans with an escrow release as a trigger to set that plan in motion. In this way, escrow can be the “SaaS-enabler” to the enterprise markets.
There are also intrinsic benefits to SaaS providers for implementing a SaaS escrow agreement. SaaS providers are finding that offering escrow is a proactive way for them to instill trust with their customers and to overcome business risk objections so that the parties involved can focus on doing business.
Contingency Planning and Execution
Another consideration before implementing a SaaS solution is a thorough understanding of viable contingency plans. What options exist if there are problems with a SaaS provider? Many times, SaaS subscribers think they are covered by their provider’s disaster recovery plan, but this is a misconception.
Here are three basic scenarios for subscribers:
- Take the application on-premises and maintain it independently of the SaaS provider
- Find a new Managed Service Provider (MSP) to support and host the application
- Keep the lights on long enough to source and migrate data to a new solution
Depending on the variables (investment in the technology, the impact of an outage and the ability to support applications), any of these contingency plans may be employed. With SaaS escrow in place, SaaS subscribers will have the tools to move forward with any of these scenarios. Whether just the source code is needed or a complete failover service is required, SaaS escrow will enable these contingency plans.
In some cases, it is cheaper to recreate the technology in-house than to source and implement new technology. In other cases, maintaining services long enough to migrate to a new solution may be the best option. Think of this as taking a bus on a trip. If the bus runs out of gas, you wish you had a spare gas container that could temporarily fuel the bus until you could safely reach a point where you can switch buses, so you then can continue the journey. You don’t want to have to build a new bus to get you there because it can be way too costly, time-consuming and complex. In this analogy, the SaaS escrow with failover is the spare gas needed to safely reach that switching point.
Regardless, it is absolutely critical that contingency plans are documented in advance of consummating the business relationship. With SaaS escrow in place, subscribers can make sure they are capable of executing the contingency plan independently of the SaaS provider.
The Benefits of SaaS Escrow
Let’s consider the benefits of SaaS escrow as it relates to instilling trust between the buyer and seller. By securing the trust, the parties can move past the contractual negotiations and focus on the relationship.
- For the subscriber, the main benefits of implementing SaaS escrow are to:
- Protect the investment in the provider’s technology
- Comply with Governance, Risk & Compliance (GRC) policy
- Optimize the vendor relationship (better support, response time and quality of service) by leveraging the escrow agreement if necessary
- Access the deposit materials or to ensure application continuity long enough to migrate to a new solution in case of problems with the SaaS provider
No one wants to think about their SaaS provider failing, but vigilance is essential. It is important to know the warning signs that could eventually lead to an untimely demise of the provider. For instance, repeated calls for support are addressed with slower response times. The people that you know and trust begin leaving the provider’s company. Social media blogs citing problems with the provider or any negative specific industry news should perk up your sensitivity. If you are ever faced with problems, SaaS escrow gives you the ability to access your data and facilitate an orderly transition to another provider. This mechanism to migrate can be vital in the case of a problem with your provider.
So we have introduced you to what is believed to be the crux of SaaS enablement. We have exposed the risks, the questions, the various contingencies, and the benefits of technology escrow, and now we will explore the guidance necessary to execute a practical and purposeful escrow arrangement to secure trust in SaaS.
The Right Guidance
The goal of SaaS escrow is to enable SaaS by instilling trust. Adequate escrow protection includes a documented tactical contingency plan to either maintain the technology independently or to allow for enough time to migrate to a new SaaS solution. With this in mind, the following steps should be followed to establish contingency plans and to protect the subscriber’s interest in SaaS.
Step One: Before considering SaaS as a solution to a business need, be clear on how the SaaS technology is delivered. If delivered via a third party MSP, make sure your pre-qualification procedures are comprehensive before proceeding down the Request for Proposal (RFP) path. As a condition of doing business, insist on a contingency plan that extends beyond the SaaS provider and work with an experienced escrow agent who can provide the right guidance.
Step Two: Determine your contingency plan based on the size of the investment (time + money + effort + opportunity cost, etc.). Will there be a need to potentially take the application on-premises or find a new solution provider? Is it necessary to include the MSP in the contingency? Determine what triggering events support the contingency plan. How will you document the contingency plan? Who will be responsible to execute the contingency plan? These are just a few of the questions that must be addressed before moving forward.
Step Three: Document your contingency plan with specificity. Do not execute any business agreements until your contingency plan is complete. If possible, test your contingency plan before executing any business agreements. If this is not possible, then make sure verification testing of the contingency plan is a contractual obligation of your business agreement (via an escrow agreement).
Step Four: Conduct verification testing. Verification testing can be as simple as making sure the mirrored environment will work when needed. It could be as comprehensive as traditional source code compilation and functional testing. The good news is that for the majority of subscribers, simple access to the recovery environment is all that is necessary to ensure contingency and to “have enough time” to migrate data. It is also important to test how easily the data can be migrated.
Step Five: Establish a well-documented repeatable process for safely onboarding new technology and socialize this within your organization. Maintain a copy of it within your company’s document repository and/or procurement/contracting procedures manual.
In conclusion, consideration should be given to creating a deeper back stop by implementing SaaS escrow as an integral part of your SaaS application deployment.
Our guidance can be summarized as these five steps:
- Understand potential fail points and insist upon a contingency plan that extends beyond your SaaS provider
- Determine your contingency plan based on the size and value of the investment
- Establish a well-documented arrangement to facilitate the contingency plan
- Test everything to verify usability
- Adopt a repeatable process for consistently and safely onboarding new technology
The key to overcoming the risks of SaaS is to demonstrate that you have planned for these concerns and have taken the appropriate action to adequately address them. A comprehensive SaaS escrow service is, in essence, a powerful risk management tool for companies involved on both sides of SaaS relationships. By assuring application and data availability, SaaS escrow helps to foster trust between all parties.