The large majority of people working in IT procurement are “significantly dissatisfied” with the way SaaS (software as a service) vendors define contract language related to security, a feeling likely to persist through 2015, according to a Gartner report.
“Contractually, very little security language appears in the body of SaaS contracts,” Gartner analysts Jay Heiser and Alexa Bona wrote in the report. “Typically the security section contains little more than platitudes, stating that the provider will use ‘commercially reasonable efforts to establish and maintain security safeguards.’ These are often declared to be ‘in line with industry standards,’ which are mostly never defined.”
SaaS vendors also tend to give themselves the right to change security language at will, rather than adhere to a specific version, according to Gartner.
Gartner reviewed more than 100 SaaS vendors’ “master service agreements or service contracts and [service level agreements]” for the report, and found that providers “are extremely vague about the forms of service, and especially the levels of it.”
“They accept little or no financial responsibility for fulfillment of these vague commitments, so even if it is determined that these obligations were not met, the buyer has no recourse,” the report adds.
While a set of standards for SaaS vendor transparency are emerging, “they cannot be considered adequately mature,” Gartner said.
For example, there’s no consistent opinion regarding what constitutes a service-level agreement, according to the report. Generally, SLA contract terms refer to application uptime and the speediness of support call responses, which lend themselves readily to hard numbers. But other measures, such as “recovery time objectives,” are “not common across the industry,” Gartner said.
Customers signing SaaS deals should seek to include an array of protective language, including the ability to conduct periodic audits of the vendor’s security measures; vulnerability testing; “ongoing background checks for administrative personnel”; and the classification of security incidents or service losses “according to severity with differing response and notification requirements according to the level of security,” according to Gartner.
In addition, customers should ask SaaS providers to maintain liability insurance policies that name the customer as a beneficiary, Gartner said.
“Nearly all contracts have a force majeure clause that excludes several forms of catastrophic incident,” the report states. “If a failure simultaneously affected 1,000 customers, and each was entitled to $2 million of compensation, it would amount to a total payout of $2 billion. Ask service providers what their total liability would be in the case of a failure impacting all of their tenants, and demand evidence of adequately underwritten insurance.”
By the numbers
Gartner’s recommendations reflect a discussion that’s been ongoing in the software industry for some time as SaaS becomes mainstream.
Spending on SaaS totaled more than $14.5 billion in 2012 and is expected to top $22 billion by 2015, according to figures Gartner released last year.
Those numbers are being driven not only by growth in pure-play SaaS vendors such as Salesforce.com, but also due to the ongoing shift by traditionally on-premises software vendors like SAP and Oracle to SaaS delivery models.
The nature of SaaS buying is also changing. Procurement is increasingly occurring at the departmental level, such as in marketing or human resources, rather than as part of a centrally planned IT strategy, a trend that could exacerbate the contract risks cited by Gartner.