Four Disadvantages to Using SaaS for Your Small Business

This is a blog response to DreamSimplicity’s “4 Advantages to Using SaaS for Your Small Business“.  DS is correct, SaaS offers several great advantages that small businesses can exploit – such as obtaining access to enterprise-class software once priced outside non-enterprise reach.  But all is not rosy and wonderful in the SaaS world.  It pays to consider all options before moving ahead with any software product, and some risks are exacerbated by a SaaS environment.  Here are four to consider:

  1. You’re still small and probably have no leverage to negotiate the license.  Even SaaS vendors offer negotiable software licenses to customers who buy above a certain threshold.  As a small business, you’ll be less likely to meet that threshold and will be tied to their unmodified EULA.  Take the time to read this document carefully, it’s the setup for the next three issues.  Oh, and just because you’re small doesn’t mean you can’t TRY to negotiate.  ALWAYS ask for the changes you want – the worst they say is “no.”
  2. The SaaS provider is going to have your data.  Building your business from the ground up within one of these platforms is terrific.  However, once you mature to the point where you consider switching, you might only now start to consider how to get your data out of the system.  If you think of this up front, you might be able to get a small change to your contract to allow you easy access to your information.  If not, do the research to see how you can export data.  Zoho, for example, is awesome.  But there’s almost no way to easily get all of the data from a fully-populated database out of ZohoCRM.
  3. The SaaS provider is going to be storing your data.  Depending on your business, you might have certain regulations governing the acquisition, storage and use of the information you gather from customers.  Again, if you’ve clicked “I Agree” to the standard EULA, chances are, the vendor isn’t offering any real protection of data.
  4. You have to consider the potential for your provider to go out of business.  With the SaaS model, you only have access to the application for so long as the provider is viable.  If the provider goes away tomorrow, so does your access to the application (not to mention your data).  As a small business, you probably won’t have access to some of the enterprise-class contract provisions here either – such as escrow, guarantees for unexpected terminations… heck, even termination notice.

So, while SaaS can offer extremely valuable opportunities, there are pitfalls, too.  Just be aware – for even if you can’t do anything about these issues from a contractual perspective, you can try to deal with it from a business planning perspective.


1 thought on “Four Disadvantages to Using SaaS for Your Small Business

  1. Axel Schultze

    Not sure when this was written – probably in the late 90’s – I just came across it today August 2009 – and just find it so cute that I had to comment.

    I think in 2001 somebody arguing against SaaS was saying …and that’s why I never enter an airplane that I don’t fly myself – fair enough. There are people who never trust anything or anybody. I trust that our freight forwarder are delivering the goods we produce and ship. But maybe we should buy our own trucks hahaha.

    And hey – if you have unlimited budgets and teams, on premise my be fun to tinker around with It freaks love it! But from a economic point of view – wow way too expensive.



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