There’s lots of jargon thrown around the world of business, and even more thrown around in IT. So the software business is drowning in it.

I’m going to attempt to de-mystify some of the common phrases that are cropping up around the world of SaaS. I’m starting with an easy target: vendor viability.

How viable is the vendor? In other words, is the company you’re buying your software from going to be around in a years time? What about in five years time?

The barriers to entry in the software as a service world are very low. Any half decent web developer can put together a web application, make it available on a subscription basis and make a professional looking web site promoting it… then lose interest or run out of money in a few months time

In the old world where you bought your software on a CD, this didn’t matter too much. You’ve got the software so if the company you bought it from disappears then you won’t get support or upgrades, but you still have the software you bought and can continue using it (although even that isn’t a given with some of the recent shenanigans).

With SaaS, it’s different. You access the software on the provider’s server – so if the provider disappears, so does your access to the software (and your data).

One form of insurance against this happening is an”escrow agreement“. The software provider gives all of their code to a third party and if said provider goes out of business, the third party releases the software to previously agreed companies (usually key customers). So the theory is that you can set up your own servers to run the software. Fancy doing that? Unless you’re a techie, I doubt it very much.

The reality is that there are no guarantees that any company that’s around today will be around in a years time, never mind five. Having said that, there are steps you can take to minimise your chances of getting burnt:
– does the vendor have a sustainable business model? (hint: giving software away for free isn’t sustainable)
– are they making profit or do they at least have good financial backers? (or better still, both)
– do they have many customers?
– are they growing?

To further hedge your bets, you need to make sure you’re regularly getting your data from your SaaS provider in a format you can access without their software.

If you’re reading this from the perspective of a SaaS start-up, then provide the functionality to provide these backups. And automate it so its one less thing for customers to worry about or have to remember to deal with. With KashFlow you can set the system to automatically and regularly email you a backup of your accounting data in a format that can be opened in a spreadsheet or imported directly into Sage.

A side note here; the vendor may well be here in 5 years. But will the product? In just the accounting software industry alone we’ve seen big companies (Microsoft, Iris, Intuit, etc) withdraw software products with very little notice. They can get a way with that with desktop software, but it’s not acceptable in the SaaS world.

If there are any other pieces of jargon that you want busting, let me know using the comments below.

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