Last week, the IT Alliance for Public Sector (ITAPS) filed formal comments urging the state of Oregon to develop a template of contractual terms for Software-As-A-Service (SaaS) that would be forward-thinking and appropriate for this emerging technology. While the state happened to be Oregon, the message from ITAPS is one that pertains to any state – in fact, it could apply to all states.
Commercial cloud services, including SaaS, are heavily discounted to be price competitive, and a primary basis for those discounts is the fact that the offerings are standardized to support multi-client solutions. Commercial cloud services are, by definition, designed and offered as prebuilt solutions that are delivered in a consistent manner to all subscribers from the cloud provider.
While some states recognize cloud computing and SaaS as emerging innovations that require new acquisition methods and strategies to realize their full potential, too many state officials still cling to outdated and decades-old terms and conditions or contract clauses that are rooted in legacy, custom-developed technology solutions. These terms include references and requirements related to hardware, hardware maintenance and support, work product ownership, project management, acceptance and testing, 15% holdback, and contractor’s personnel. These terms might be in order for a custom developed software agreement, but they are out of step with cloud computing technology and have no place in a cloud computing contract template.
Cloud services offer both a tremendous value and cost savings in terms of modern technology capabilities for state and local governments. We hope state and local governments around the country will incorporate "SaaS compatible" and commercially acceptable terms and conditions into their cloud computing contract templates. If states continue to rely on outdated or unique terms that are out of step with the cloud provider model, the result will unfortunately be fewer bidders, reduced competition, and higher technology project costs for their taxpayers and citizens.