SaaS Capabilities Maturity Assessment

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Professionals

Key TaKeaWays

prior To saas adoption, Make sure That The solution is a Viable Candidate

We developed this maturity assessment to help organizations identify and address hurdles to SaaS success. Th e fi rst step is to determine the fi t of SaaS within the solution category, identifying factors such as complexity of business process, maturity of SaaS in the category, and relevance to business users.

identify a saas solution With The Technical Capabilities To suit your Business Requirement

When considering a new SaaS solution, buyers should consider their organization’s ability to support distributed development, their technical knowledge of the solution, and third-party partners with relevant skills.

ensure That your organization has sound solution Governance and purchasing processes

Understand the readiness level of your SaaS governance processes by considering the clarity of your solution ownership defi nition as well as user management methodologies and formal IT governance tools. Evaluate user needs and usage patterns, defi ne pricing models and goal costs, and analyze the capability for a long-term vendor relationship.

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Why Read This RepoRT

Enterprise software-as-a-service (SaaS) usage is proliferating across categories as companies see benefits such as business agility, rapid time-to-value, and pay-as-you-go pricing models. But sourcing strategy for SaaS is often an afterthought. The typical business-led, try-and-buy purchasing patterns for SaaS have left organizations with multiple siloed instances of SaaS solutions, weak integration with enterprise IT strategy, uncontrolled costs, shadow IT, and new risks to the enterprise. This report highlights five key categories that matter for making SaaS purchases successful: category fit, technical fit, application development maturity, governance maturity, and sourcing maturity. This report also includes a self-test for assessing your organization’s maturity across each of the five categories that will help identify gaps that could inhibit success and diminish the benefits that SaaS promises.

notes & resources

For this report, we used Forrester research.

a Self-test For identifying readiness to gain Value From SaaS

by liz Herbert

with William Band and Ben Jennings

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saas pRoMises BiG BeNeFiTs — BUT FReqUeNTly Fails To aChieVe ValUe

SaaS promises fast time-to-value, business empowerment, innovation, and better utilization (user adoption) versus older on-premises technologies.1 But SaaS solutions are not the best fit in every

case.2 Functional misalignment with business needs and technical limitations in areas including

integration, security, or extensibility can be deal breakers. Aggressive adopters of SaaS as well as skeptics and naysayers should start with a road mapping exercise to take a realistic assessment of whether a SaaS tool could be a good fit for any new application purchase.

Even if a SaaS solution is a fit, organizations still may not be able to gain the promised benefits if they do not have certain prerequisites within their own skill sets, such as the right developer talent and governance model to work in an agile, iterative approach that leading organizations have adopted in SaaS models. For example, the promise of innovation through multiple automatic upgrades each year and add-on applications from peer sharing and app store (ecosystem) models sounds attractive; SaaS solution owners need to adopt a new mentality and new way of working to make these successful.

This report contains a self-test to determine where a SaaS solution could be a fit and to assess organizational readiness for successfully adopting SaaS within a potential category.

assess yoUR ReadiNess To sUCCessFUlly adopT a saas solUTioN

To help companies assess where SaaS is a strong or weak fit, identify readiness to adopt SaaS for a specific purchase, and address hurdles to SaaS success, we developed Forrester’s “SaaS Capabilities Maturity Assessment.” Before purchasing a SaaS solution, determine whether: 1) the solution category is a good candidate for software-as-a-service; 2) the SaaS solution has the requisite technical capabilities to support the business requirement; 3) your organization has development skills suitable for SaaS; 4) your organization has an appropriate solution governance process to capitalize on the benefits of SaaS; and 5) your SaaS purchasing processes are sound.

determine The Fit of saas Within The solution Category

Certain categories of business applications (such as collaboration, CRM, and human capital

management applications) are highly suited to SaaS deployment, whereas others (such as core banking or supply chain management) are not. Factors such as complexity of needs, maturity and availability of solutions within the category, and relevance to business users can help determine whether SaaS will make sense for a specific type of solution. Key factors to consider include (see Figure 1):

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The complexity of the business process. SaaS is well-suited toward standard, commoditized processes that are common across many organizations. This is because all organizations using the solution will share the same version of the solution in a multitenant setup. Early examples where SaaS showed strong success include CRM, human resources management, travel and expense,

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procurement and sourcing, and collaboration (including email).3_{The next generation of SaaS}

solutions is growing into areas such as financials, which are closer to the core but typically still similar across most organizations. SaaS has made minimal inroads into areas that are complex or industry-specific business processes, such as core banking applications or manufacturing.

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The maturity of SaaS in the category. Clients considering SaaS should assess the potential solutions available to them in the SaaS market. Key factors to consider include how many other organizations have moved to SaaS in this particular category, whether the leaders in the category have transitioned their applications to SaaS, and whether the SaaS alternatives have achieved (or surpassed) functional parity with the on-premises options. The market may be too risky or immature if there are only small startup vendors with few clients moving to SaaS, there is lack of globalization (multilanguage, multicurrency) of the solutions, or significant feature/ functionality gaps.

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The speed of business change in processes where you will use SaaS. SaaS vendors promise easy point-and-click configuration that lets business users make changes in real-time to align with changing business requirements. This benefit has more potential in categories that are quickly changing, such as marketing automation or sales automation, where the technologies are mingling with new areas like social and where customer demands are driving business change at a fast pace. This will be less of a benefit in an area where change happens slowly — or is not desired, perhaps in general ledger/accounting systems of record.

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Relevance to business users. SaaS enables opportunities for empowered business users to manage technology. SaaS also promises fast and easy adoption with its intuitive user interface and easy personalization capabilities, typically borrowed from consumer web paradigms. These benefits apply strongly in categories where there is a large end user population of business users (such as travel and expense or sales automation solutions). They apply less in cases with a small, highly trained user base or IT-centric one, such as payroll processing or systems management.

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Network effects. With all users on the same version and a centralized hub model, SaaS can offer additional benefits in cases where organizations are networked. For example, a SaaS security provider can detect patterns of threats and can send out alerts or update its solution to respond. A SaaS supplier management company (such as Aravo) can detect problems in the supply chain

(such as contaminated paint in a specific country or an earthquake affecting supplies) and can automatically reroute traffic accordingly. These benefits will typically apply when the SaaS solution touches organizations or devices outside your organization’s four walls.

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Figure 1 SaaS Capabilities Assessment: Category Fit

Source: Forrester Research, Inc.

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Scoring: 1=Strongly disagree, 2=Slightly disagree, 3=Neutral, 4=Slightly agree, 5=Strongly agree

1 Category fit

1.1 Complexity of business process

The business process(es) for which I would use this SaaS solution are simple, standardized, and similar to those of other companies.

1.2 Maturity of SaaS in category

There are many strong SaaS options in this category that we have identified that could fit our needs. 1.3 Speed of change within this business process

The business process(es) for which I would use this SaaS solution are changing rapidly. 1.4 Relevance of this application to business users

This application is highly relevant to a large population of business users, touches business users on a daily basis, and is critical for their day-to-day work.

1.5 Degree to which this application is networked to customers and partners This application is used heavily by partners and customers.

Score:

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evaluate The Technical strength of saas solutions Versus Needs

SaaS technologies have grown up quickly since the early versions of no customization and limited

integration. Leading SaaS vendors (but not all) have robust platform capabilities that can support

custom coding and real-time integration. SaaS buyers should evaluate their own requirements and the fit of a potential SaaS solution against those business, IT, security, and legal requirements, such as (see Figure 2):

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Integration needs with other systems. SaaS integration is possible — and leading tools from Informatica to Dell Boomi to IBM Cast Iron to MuleSoft to webMethods to Tibco can help clients solve SaaS integration problems. But SaaS integration still has some challenges that could inhibit your company’s ability to achieve success. It requires data to flow over the public (bandwidth-constrained) Internet; it can be costly, and some SaaS vendors do not fully expose all their application programming interfaces (APIs) or do not have strong documentation around how to access the APIs.

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Customization (extensibility) requirements. SaaS solutions naturally suit a best-practices-led approach to deployment. SaaS vendors must enforce some restrictions to continue the “unbreakable” upgrades. Some SaaS solutions are built on top of a robust platform-as-a-service,

allowing customization. But, even in cases where customization is possible, the SaaS vendor may restrict it (by number of objects or number of custom fields). Therefore, SaaS buyers must consider how far their needs stretch beyond the available solution capabilities and determine their plan for addressing (or living with) gaps.

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Security requirements. SaaS buyers cite security as the biggest hurdle to adoption.4 Buyers must

understand what they require in areas including encryption, data management and hosting, authentication and user management, third-party standards, and compliance and auditing. Smart buyers can consider whether they have different restrictions for different types of data going into the SaaS system or for different user populations. (Most do!) SaaS vendors have significantly amped up their own security capabilities to meet buyer demand (such as salesforce. com’s acquisition of Navajo for on-site data residency option). But buyers also have a growing market of third-party add-ons they can consider, such as security monitoring (McAfee Cloud Secure and HP Cloud Assure) or user management tools (e.g., Symplified).

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Performance and uptime. SaaS solutions can offer better uptime and performance than many internally operated ones. However, buyers comparing SaaS service-level agreements (SLAs) to the world of hosting, where 99.99% or higher is standard uptime, or to certain internally hosted applications (especially mission-critical ones that have significant investments toward zero downtime), will find the SaaS space lacking. These multitenant environments with their automatic upgrades and often nightly windows reserved for maintenance and patching rarely guarantee more than 99.9% uptime. Pure SaaS also faces challenges around performance and latency, especially for bandwidth-intensive processes, because of its reliance on the public Internet and the inevitable bandwidth limitations we face when accessing solutions over the public Internet. So firms should determine what they truly require, what they are able to achieve in alternative (or today’s) models, and how the SaaS option stacks up.

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Platform capabilities of the desired SaaS solution. Not all SaaS is created equal. Some SaaS will stack up extremely well against technical, security, and performance requirements; some won’t. You should look at the specific platform maturity of the vendor you are evaluating. Can your SaaS vendor achieve customization, integration, security best practices, high availability, performance, and business continuity? To determine how robust the SaaS platform is typically requires a detailed RFP, questionnaire, or technical assessment.

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Figure 2 SaaS Capabilities Assessment: Technical Fit

assess your level of development skills For supporting a saas solution

SaaS development requires a new mindset, a shift to a more iterative and agile approach. SaaS development creates new roles and responsibilities for business users, leaving organizations struggling with where it benefits them to allow business-led development and where it simply creates shadow IT and more risk or complexity. And SaaS often brings with it new, unfamiliar tools and new languages not seen before by an organization. This puts organizations at risk of not getting the promised value from a SaaS solution. Buyers should consider (see Figure 3):

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The ability of developers to work in an iterative model. SaaS poster children share stories of fast development cycles lasting days or weeks. This means significant organizational shifts from the way development takes place in a traditional on-premises world, in most cases. SaaS development puts an end to long phases of blueprinting, designing, and testing that culminate in a massive go-live date in favor of more incremental, iterative, and collaborative design.

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2.1 Sophistication of integration needs with other systems

This solution will have minimal integration points to other solutions. The few that it might have will be simple, light amounts of data and not real-time.

2.2 Degree of customization needs

This business process is in line with typical or standard processes in its domain and/or industry, meaning minimal customization is likely to be needed.

2.3 Security requirements of data being put into the SaaS solution

The data we would use in this solution does not have stringent regulatory or legal issues associated with it that would prohibit its usage in a cloud scenario.

2.4 Requirements for performance and uptime

This is not a mission-critical application that requires 100% uptime and fast page-refresh times of less than one second.

2.5 Strength of the technology capabilities of cloud platform in the category

2 Technical fit Score:

The potential SaaS solution(s) we have considered for this technology show a high degree of technology maturity, including advanced platform capabilities, strong customization and integration tools, security, and performance guarantees.

Total

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The ability to support distributed development. SaaS facilitates distributed development models, meaning that the solution can be easily developed in real-time from anywhere in the world. Additionally, even if firms are running multiple instances of a SaaS solution (perhaps due to organizational decision-making, differences in business lines, or reporting structure reasons), anything created on one instance can be packaged, shared over the SaaS network, and injected into another instance. But organizations can’t take advantage of this if they are not set up or experienced working in this way.

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The technical knowledge of the SaaS solution. SaaS solutions require coding in new (often proprietary) platforms (such as salesforce.com’s Apex language or NetSuite’s SuiteScript). Organizations that want to move to a SaaS solution will need architects, programmers, and other technical experts who understand the platforms, tools, and best practices for working in these new platforms and tools.

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The knowledge of SaaS integration tools and methods. Clients can solve SaaS integration through a variety of ways: direct point-to-point coding, large integration platforms such as webMethods or Tibco, or specialty tools and hubs that cater to the SaaS market. To choose the right approach, clients need experience in what works and how to do it. This will require not only new skills but also knowledge of new tools and technologies such as Dell Boomi, IBM Cast Iron, Informatica Cloud, Hubspan, MuleSoft, and others.

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Third-party partners with relevant skills. Growth in the SaaS market has made it an attractive area for third-party systems integrators (such as Accenture, IBM, Deloitte, Capgemini, TCS, Wipro, Infosys, Cognizant, and many others). SaaS buyers should consider their existing key IT

suppliers and whether they may have a role to play to help with future SaaS development needs for selected solutions, rather than having to start from scratch building up talent or new relationships.

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Figure 3 SaaS Capabilities Assessment: App Dev Maturity

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3.5 Third-party partners already in-house who can help

Third-party partners already used today have significant knowledge of the SaaS tool and practitioners with skills specific to the SaaS tool under consideration.

3.4 Knowledge of SaaS integration scenarios and tools exists

We have significant knowledge of how to integrate the SaaS tool(s) under consideration, including any likely integration technologies and their use cases specific to our likely SaaS integration scenario(s).

3.3 Technical knowledge of the SaaS tool

We have significant experience with the SaaS tool(s) under consideration and all languages and technologies associated with their use.

3.2 Ability to support distributed development

We have significant experience and processes in place for supporting distributed development, including with other SaaS applications.

3.1 Ability for your internal developers to work in an iterative model

Our developers (who would work on the SaaS solution) already use a highly iterative development approach and/or have significant experience developing on other SaaS solutions.

3 App dev maturity Score:

Understand The Readiness level of your saas Governance processes

SaaS buyers must have the right elements of solution governance in place to keep the solution manageable. They must maintain the right balance between business agility and focus on fit with enterprise architecture goals and risk management. Key areas to consider are (see Figure 4):

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A clearly defined solution ownership. SaaS empowers the business users, allowing business roles to manage solutions, build their own features, and even create custom code or reports through point-and-click “wizards.” But this simplicity creates new questions as well: What should business users be responsible for and what should IT continue to manage? SaaS governance is a critical and evolving area that lets SaaS users balance business empowerment and business agility with control and oversight.5

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An established support model. SaaS support looks very different from traditional on-premises models. Typical L3 and L4 support will be included in the subscription fee and handled by the SaaS vendor. Bugs in core code are less likely to surface with all customers running on the same multitenant version. But how-to issues, integration challenges, and issues in the custom code can all pose challenges. Some firms are building up their own support desks or looking to their traditional support partners for help desk services.

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A model for managing and prioritizing requests. SaaS vendors market a fast pace of change, quick ability to make changes to the system, and a multitude of new features and function released every year through automatic upgrades. But this doesn’t mean that firms should have a free-for-all approach to development, especially for material changes to the solution. Leading users who have proven successful with larger-scale SaaS deployments still have a formal model for managing and prioritizing requests, typically with involvement from a steering committee composed of business and IT executives to drive decisions.

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User management methodologies and tools. SaaS boasts the easy flexibility to scale seats up and down, to let any user develop on the system, and to support app store model downloads off an ecosystem. Unfortunately, too many SaaS solutions are managed outside of corporate IT, which creates significant risk (for example, a salesperson leaves a company but can still log in to salesforce.com). The model can only succeed if strong governance is placed around who can onboard or remove users, what permissions the users have, and who can download add-ons or otherwise modify the system.

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Formal IT governance tools. Formal IT governance tools are appearing in the SaaS space to help firms track SaaS performance, costs, and business value. Firms may already have some of these (vendors or tools) in-house and can extend them to new SaaS purchases for governance

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Figure 4 SaaS Capabilities Assessment: Governance Maturity

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4.1 Clearly defined parameters around SaaS solutions ownership

We have well-defined parameters for SaaS solution ownership in a proven and mature model that we use today.

4.2 Well-established support model for SaaS solutions

We have a well-established model for supporting the SaaS solution, including hand-off points between business users, IT, and the SaaS vendor.

4.3 Well-established model for managing and prioritizing requests

We have a clearly defined, centralized decision-making committee that can balance speed of business needs, cost, and long-term vision.

4.4 User management methodologies and tools (for onboarding or single sign-on)

We have user management and provisioning tools already in use that could be used with this system that are highly compatible with SaaS and made for easy provisioning and sign-on and work with all other relevant systems.

4.5 Formal IT governance tools for SaaS

We have already invested in tools that we can use for SaaS governance, such as SLA tracking, financial management, and contract management.

4 Governance maturity Score:

identify Challenges To your saas sourcing process

SaaS deployments can run into challenges when they don’t have a contract aligned with their business goals or long-term solution needs. With many business-led SaaS deployments, buyers lack the knowledge to understand long-term implications of their agreements. This can result in overage charges, inflexible contracts, or weak SLAs that don’t match up with business needs. Key areas to evaluate include (see Figure 5):

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Existence of a formal sourcing process or group relevant for SaaS. Organizations with leading strategy for sourcing and managing SaaS have centralized key activities. They are creating repositories of contract templates, centralizing contract management, and building up best practices for negotiating and working with SaaS vendors.

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Defined SaaS contractual terms or templates. SaaS buyers can jump-start their SaaS

relationship with defined contract terms (or templates). Leading organizations have a head start in signing deals by coming to the table with predefined terms and conditions that show what their organization requires from a SaaS vendor.

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Clarity of user needs and usage patterns. SaaS buyers can’t successfully negotiate favorable deals that ensure flexibility and fair pricing if they don’t have clarity about user needs. In some cases, there may be unknowns, but organizations should try to gather as much information as they can (through surveys, peer organizations, or early adopter divisions). Too many organizations go to the negotiating table with little visibility into what they want, leaving them at a loss when it comes time to select editions or add-ons that could have a big financial or business benefit impact long term.

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Well-understood pricing model and cost goals. SaaS vendors frequently put pricing information up on their websites, creating transparency and visibility into different types of pricing options and list pricing. But buyers need to understand what their real pricing should be — and be able to navigate a fair pricing model, discount, and extras versus the type of solution and add-ons their business requires.

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Vendor management capability for a long-term vendor relationship. The last “s” in SaaS is of

course for service, emphasizing that these solutions are pay-as-you-go relationships that require

care and feeding. SaaS vendors will, by definition, require ongoing management and value tracking. They will come up for renewal; they will provide core elements of service delivery and support. SaaS buyers should consider how they plan to manage and work with the SaaS vendor. Critical areas include understanding the long-term road map, new features/upgrades coming out, service and support, renewals, and training.

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Figure 5 SaaS Capabilities Assessment: Sourcing Maturity

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5.1 Existence of a formal SaaS sourcing process or group

We have a formal SaaS sourcing process or group and specific experience negotiating with this specific SaaS vendor, for this scale and this type of contract.

5.3 Clarity of user needs, usage patterns, and storage needs

We have done extensive analysis of all divisions, users, and user groups to fully understand all our needs in the context of this SaaS solution.

5.5 Vendor management capability for long-term vendor relationship

We have well-established vendor management capabilities with substantial SaaS vendor management expertise and experience for this specific vendor.

5.4 Well-understood pricing model and cost goals

Our sourcing group has significant knowledge of SaaS pricing models and costs (and discounts) for our SaaS purchasing scenario.

5.2 Defined SaaS contractual terms or templates

We have well-established SaaS contracting terms and templates (general) and well-defined needs for this specific purchase.

5 Sourcing maturity Score:

Scoring: 1 = Strongly disagree, 2 = Slightly disagree, 3 = Neutral, 4 = Slightly agree, 5 = Strongly agree

self-assessment helps you identify Readiness For saas and Key hurdles

The SaaS maturity assessment will help you to judge whether SaaS is a good fit (see Figure 6). High scores indicate a likely strong fit with minimal hurdles to address; extremely low scores mean risks and hurdles may be too great and may be prohibitive to succeeding with a SaaS investment in the particular scenario you evaluated. Scores in the middle will typically indicate that you can succeed with a SaaS rollout — but that hurdles exist. The tool gives guidance about these gaps. Some are technical and can be overcome with add-on solutions or a specific SaaS vendor that can address the gaps. Some of the challenges are organizational and will require change management, hiring, or upskilling.

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Figure 6 SaaS Capabilities Assessment: What It Means

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What it means Scoring key:

>4: Strong fit for SaaS; high maturity and readiness to move to SaaS

>3 and <4: High potential for success with a SaaS solution if gaps are addressed

>2 and <3: Possible to succeed with a SaaS solution, but significant gaps exist

>1 and <2: Low potential for success with a SaaS solution; significant hurdles

<1: Extremely unlikely that SaaS would be suitable for this business area

R e c o m m e n d at i o n s

Use This assessMeNT To dRiVe Go/No-Go deCisioNs aNd To Close Gaps

The self-test included in this document can be used to:

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Create a road map to drive go/no-go decisions. The most basic use case for this self-assessment is to inform yes/no decisions around whether to invest in a SaaS purchase. This tool has breadth around category, technology, platform, and organizational questions that can guide purchasing decisions. This tool can also help identify areas where due diligence or add-on solutions may be required.

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Identify hurdles to SaaS success — and work to address these. This tool will likely uncover challenges to a SaaS rollout, both organizational and technological challenges. Organizations buying SaaS should use this tool to gain insight into what hurdles they may face and use this as a framework to identify areas to address. For example, they may need to improve their contracting strategy or their approach to governance to work in a more agile, iterative way and take advantage of SaaS.

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Create templates, hiring profiles to improve your IT strategy. The SaaS maturity

assessment can help identify skills gaps: application development, integration, sourcing, and contracting. The tool can also help identify areas where organizations need to invest more in methodologies or templates, such as SaaS governance or SaaS contracting. This assessment can help organizations identify areas in which to hire or source third-party skills as well as areas in which to build up tools, templates, and methodologies for ongoing SaaS investments

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sUppleMeNTal MaTeRial online Resource

The online version of Figure 1, Figure 2, Figure 3, Figure 4, Figure 5, and Figure 6 is an interactive tool to help SaaS buyers determine where a SaaS solution could be a fit and to assess organizational readiness for successfully adopting SaaS within a potential category.

eNdNoTes

1 _{Cloud applications continue to gain momentum in enterprise applications as buyers are attracted to fast}

deployment speeds, low upfront costs, and ongoing flexibility to scale up or down as needs change. But as firms spend more and more of their closely guarded IT dollars on cloud applications, sourcing executives must scrutinize the long-term value of these investments. Today’s cloud investments represent millions of dollars of annual IT spend for some larger consumers of cloud. See the June 23, 2011, “The ROI Of Cloud Apps” report.

2 _{Software-as-a-service (SaaS) is an important new set of capabilities and engagement models in the IT}

industry, particularly in the emerging world of cloud computing. We project that SaaS offerings will grow from 7% of total software revenues in 2010 to 17% in 2013. See the January 12, 2011, “Which Software Markets Will SaaS Disrupt?” report.

3 _{A recent Forrester survey showed that 43% of 1,058 international IT executives and technology}

decision-makers from organizations with 1,000 or more employees are either interested in or planning to implement a SaaS option supporting horizontal business processes like CRM and HR in the next 12 months. Forty-five percent are interested in or planning to implement a SaaS solution for collaboration or email-as-a-service in the next 12 months. Source: Forrsights Services Survey, Q2 2012.

4 _{When asked, “What is preventing your firm from (using/using more) public-as-a-service offerings?” 43% of}

1,058 international IT executives and technology decision-makers from organizations with 1,000 or more employees cited, “We cannot manage security to our own strict standards” as the greatest obstacle. Source: Forrsights Services Survey, Q2 2012.

5 _{We have provided in-depth information on SaaS governance in a previous report. See the November 12,}

2012, “Capitalize On SaaS CRM Solutions With Better Governance” report.

6 _{We have provided in-depth information on SaaS vendor management tools in a previous report. See the}

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SaaS Capabilities Maturity Assessment

table of contents

notes & resources

related research documents

a Self-test For identifying readiness to gain Value From SaaS

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Forrester Focuses On

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