CIOs will force SaaS vendors to limber up and get more flexible about contracts in the post-pandemic world

No more paying for non-existent employees, users, page views, or transactions, says Forrester


Research group Forrester has predicted Software-as-a-Service providers will have to adapt their commercial models and offer more flexible deals in response to economic changes brought about by the COVID-19 pandemic.

A strategy paper from Ted Schadler, principal analyst for application development and delivery professionals, said that SaaS commercial models would be too inflexible for the uncertainty and volatility that is set to mark the "new normal" emerging as lockdowns gradually ease.

"The software industry has radically improved its ability to rapidly deploy new functionality to enterprise clients, but too many providers have stubbornly held on to pricing and contract models based on future deployment rather than actual value delivery," he said.

But leadership in the IT department and corporate procurement is becoming more wary of getting into commercial deals they cannot get out of when the economy changes.

"CIOs that accepted these models are now locked into paying for non-existent employees, users, page views, or transactions," Schadler said. "Their successors won't repeat that mistake. The SaaS vendors that will be most successful in the future will be those that best provide the agility and outcomes focus that customers need in the pandemic recession – and forever afterward – by aligning subscriptions with the value that customers realize from their software."

The comments echo criticism of cloud-based enterprise workflow company ServiceNow, which was said to be "tone deaf" in failing to offer flexibility in contracts as some companies reduce their number of employees as a result of the pandemic-linked downturn.

Reportedly, the company's CFO had written to customers saying that changing existing contracts would pose unacceptable legal and accounting risks for the business.

In a statement to The Register, ServiceNow said it was committed to helping customers manage through this difficult time. "While ServiceNow contracts are non-cancellable, we have taken measures to provide customers in highly affected industries with greater flexibility to manage through the challenges."

The Forrester report, The Pandemic Recession Demands A Digital Response, also predicts a change in products from platform providers: companies that offer industrial or commercial services via a cloud-based system. These include payment providers like PayPal and Stripe, but also industrial giants like General Electric and Siemens, which flog platforms for maintenance and support, as well as ecommerce platforms for businesses such DBS and Luxasia.

"Many of them have value-based commercial models already, but many are also struggling to become proper software companies with mature product management, developer networks, and industrialized customer success processes," Schadler said. "To offer confidence and resilience, they must amp up their commitment and investment."

Internally, Forrester sees companies adopting the famed fast-sprint agile method for building software in all areas of the business. "As they gain confidence and mastery in the agile mechanism, they expand this agile way of working to everything they do – including customer experiences, product development, marketing, sales, operations, employee experience, IT, and new business models," Schadler said.

Never mind the fact that the agile method is unevenly applied in software development.

Next on the tick-list is data. Forrester imagines businesses will become "insights-driven" in response to the pandemic and "curate... data resources, integrate them with external data, and continuously scan the environment for risks and opportunities".

The analysts' observations look great on paper and they may well have good intentions. Whether the vision becomes reality is another matter. Companies in free-fall can make strange decisions and middle management can be a political snake pit. The loudest voice, rather than the wisest argument, gets heard. ®

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