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Why IT can be OK with users managing their own SaaS services contracts

I just returned from Forrester Research Inc.’s Services & Sourcing Forum in Chicago. Newsflash: Chicago is a windy city! Another newsflash: The road to creating and managing IT outsourcing contracts is a long and winding one – especially when business users start procuring their own services, such as applications via Software as a Service, or SaaS.

When my colleague Christina Torode covered the Burton Group’s Catalyst conference this summer, the buzz among IT executives was that business users were purchasing SaaS services without running these agreements by IT first. As Torode reported:

“Business users tired of waiting for IT to provision a new application or service are tapping cloud providers and bypassing IT along the way, much as they have for many Software as a Service applications over the past few years. And cloud providers are not calling on the IT department, but rather going to department heads to pitch their wares.”

But if this trend makes it harder for IT outsourcing contract professionals to oversee the company’s IT assets as a whole, there is also a flip side: When business users procure their own software, it doesn’t come out of the IT budget.

During a breakout session on SaaS services and cloud computing outsourcing contracts, Forrester senior analyst Liz Herbert said that she’s heard that some IT outsourcing contract professionals would actually prefer that individual departments continue purchasing their own SaaS services for this reason. In this economy, with all budgets and spending being scrutinized so closely, why make it look like IT is doing the spending if these other departments are willing to foot the bill?

To be fair, I noticed some snickers from the IT contracting professionals in the room upon hearing Herbert’s comment, so perhaps it’s not a common point of view but I thought it worthy of mention nonetheless. Certainly, it speaks to the need for governance in IT outsourcing contracts on an enterprise-wide level – a subject I’ll be delving into in the coming week.

Has your IT organization surrendered oversight of SaaS services contracts procured by the business, or do you still intend to oversee all these IT outsourcing contracts throughout your organization?

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If individual departments bypass IT on such projects who is coordinating their purchases? What if we end up with 4 redundant apps (paid for 4 times) because 4 different managers went out and bought their own instead of working together? How does IT respond when questions of information lifecycle, regulatory compliance or, heaven forbid, eDiscovery, arise and they are totally in the dark about where the organization's data even resides? And on an even more basic level how does IT respond when users call and ask for help with "Cloud App A" and IT didn't even know they were using it? Information anarchy is a false economy. The real TCO of it, especially if the stakes are raised by litigation or audit, is considerably higher.
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