Venture Capital Jobs Blog

More and more businesses and consumers are trusting their data to SaaS providers who store customer data in the cloud.  Of course you have the well known SaaS players like Salesforce.com and 37signals but there are also plenty of smaller guys out there.  Because its fairly cost-effective to build a SaaS app thanks to Amazon and other utility computing players, you have a proliferation of companies and solutions from which potential customers can choose.  Choice is certainly good for the customer, but because the SaaS space is so fragmented with many small players (many of whom are probably not financially viable in the long run) you could see a situation where your SaaS provider goes under, and takes your data with it!

There are a few ways to mitigate this risk, although frankly none of them are that great in my opinion:

1. Work with only larger SaaS companies and ignore smaller SaaS players (lose out on innovations made by smaller companies)
2. Request raw data dumps from your SaaS provider (good luck making heads or tails of that data)
3. Work with providers who agree to some standard APIs or data models that allow for easy retrieval of data and prevent lock-in (we’re a long way from that sort of nirvana…)

I know many SaaS companies would happily do #2 (especially if the topic came up as an objection in the sales cycle) but frankly, without #3, there is not much a customer will realistically be able to do with the data.  Taking a vendor’s proprietary data format and making heads or tails of it is generally quite painful.  Small-medium IT shops may certainly get a warm fuzzy feeling that their SaaS provider will give them all the data they want, but if the customer is actually forced to do something with the data because their provider goes out of business, chances are they are going to spend alot of time and money ‘restoring’ the data into a comparable application environment.

Painful stuff…I wonder when we will start to see SaaS vendors moving in the direction of #3 (portability and interoperability between SaaS apps)?

Related articles by Zemanta

• Salesforce.com outage exposes cloud’s dark linings (theregister.co.uk)
• Bloodbath in the Clouds Continues as RSS Email Service Shutters (micropersuasion.com)
• SAP Acquires Coghead’s Technology As It Looks Towards The Cloud (techcrunch.com)