Blog Entry

Aug 30
2010 

Software Monetization in the Cloud: Stop #1 on the Path to SaaS Profitability – User Friendly Service Agreement Compliance (Part 2 of 5)

At the highest level, there are two core ways issues with service agreement compliance will end up costing you, the service provider, a significant amount of money:

  1. If your service is being used more than you are getting paid for it – you are losing money (duh)
  2. If you don’t proactively track compliance and have to go back to a customer to request back payment it will cost you. End-user frustration will cause irreversible damage to customer satisfaction (best case) or even lead to the loss of the account (worst case).

In the cloud, compliance can be a bumpy process. SaaS applications are the epitome of instant gratification – how do you manage compliance without impacting that experience for the end-user? Denial of use is a license enforcement tactic that has been on the decline even on-prem markets for some time now. The last thing you want to do is to stop a billable use of your software. It is important that you have the ability to authorize and control the use of your services.

If access control has failed you, the next best thing is visibility – you need to power to know who used what, when, and for how long. Armed with this information you can recover lost revenue from users out of compliance with their service agreements. Be warned though – this method of tracking usage post consumption and chasing down payment after the fact is not a long term business model. End-users expect that their access is controlled by you as the service provider. Have you ever had to go back to your boss at the end of the year and ask for a large additional sum of money b/c of a vendor billing mistake – if you have I am sure the first thing you did after paying the overage bill was look for a new vendor!

Service agreement compliance is a real issue that will cost you money if you can’t control it. Even the big players don’t have it right yet, as was reinforced by a recent meeting with one of the industry’s most well known cloud service providers. This particular vendor has been around for more than 10 years. According to their CEO, about 2 years in business leaders found it odd that not a single customer had requested additional seats for their application. This prompted an audit revealing that not a single customer was in compliance with the terms of their original service agreement, and these were massive, high profile customers.

Do your business and your revenue number a favor – make sure to build a proven service provisioning and control solution into your business strategy. It will pay for itself many times over!
Want to learn more? Visit www.sentinelcloud.com, view a recent webinar co-hosted by Saugatuck Technology on a similar topic at www.safenet-inc.com/NavigateTheCloud, or email me directly at SaaS@safenet-inc.com!

View other posts in this series now:

Software Monetization in the Cloud (Part 1 of 5)