Wednesday, May 16, 2007

Service Escrow - Iron Mountain

Last month I riffed with Gianpaolo about Service Escrow. A few days later, a company called Iron Mountain launched an SaaS escrow service, covering the source code, system documentation and data.
Gianpaolo (who is one of Microsoft's SaaS experts) refers to companies providing this service as SaaS undertakers. But it might be better to call them SaaS support. By acting as a safety net for SaaS providers and their customers, they may reduce the risk associated with SaaS and contribute indirectly to SaaS market growth.

I phoned Iron Mountain to find out more about their SaaS Escrow service, and the extent to which it differed from the traditional software escrow service. Here are some of the main points of our conversation.

Storage Model

Iron Mountain stores both the software (source code, object code and documentation - all of which belongs to the SaaS provider) and the data (which belongs to the SaaS user). Whereas traditional software escrow can often operate on a fairly slow cycle, with new software versions deposited in a fairly leisurely manner, SaaS escrow generally calls for live data backup.

If the escrow conditions are triggered, Iron Mountain will release the software and data to the SaaS user. To avoid any perceived conflict of interest, Iron Mountain does not operate the software - even on an emergency basis. But this means that the SaaS developers (or some appointed third party) must install and test the software on a new server, load and test the data, and then restore the service.

This is probably not something that can or should be done overnight - so it is not going to provide much protection against a sudden and unexpected failure of a business critical service. A more likely scenario is a gradual worsening of the relationship between the SaaS provider and the SaaS user, and a growing dissatisfaction with service levels and support arrangements, approaching the point where the SaaS provider is in breach of contract. SaaS escrow means that the SaaS user has a reasonable exit from an unsatisfactory relationship, and cannot be held to ransom because the SaaS provider controls a key business asset.

The economic benefits of escrow therefore fall under the economics of governance - making sure the SaaS user has proper control of the relationship.

Charging Model

Although the SaaS provider may benefit from the existence of SaaS escrow, the prime beneficiary is the SaaS user. Historically, it has always been the user who has negotiated and paid for escrow. However, Iron Mountain is increasingly seeing more complex arrangements whereby the software provider pays for the escrow and passes these charges onto the sofware user.

In the case of SaaS escrow, a typical arrangement would be that the SaaS provider pays for the deposit of the software, while the SaaS user pays for the deposit of the data (depending on the data volumes).

It is in the interests of the SaaS user that Iron Mountain always holds the latest version of the software. Iron Mountain therefore encourages the SaaS provider to deposit software upgrades as frequently as necessary - preferably online - and does not charge on the basis of frequency. (Remember that SaaS software may undergo a faster improvement cycle than traditional software packages.)

Management Process

SaaS escrow only works if the SaaS provider has adequate software configuration management and data management, so that it becomes a matter of routine to send controlled copies to Iron Mountain. There is a certain amount of ongoing verification and audit that needs to be carried out, involving all the parties to the escrow arrangement, and Iron Mountain sees this as an important aspect of its own role.

Remember that the SaaS user does not see the software unless and until the escrow conditions are triggered - so it isn't possible to test the escrow arrangements in a trial run exercise. Instead, it is necessary to test the process at a higher level of abstraction, to provide some reassurance to the SaaS user that the escrow would work adequately.

Future

This is early days for the SaaS escrow market, and I shall be interested to see how the market develops ...