What to ask before saying yes to SaaS, cloud computing

Not surprisingly, SaaS vendors have decided there's no time like the present to make a full court sales press. In a down economy with slashed IT budgets, when there's no tolerance for 18-month software implementations and the price tags of on-premise software from Oracle and maintenance fees for SAP applications are not falling, software-as-a-service and cloud computing offerings become more attractive options for businesses.

(MORE ON CIO.com Eight Reasons Why Companies Still Say No to SaaS | SaaS's Impact on the Enterprise ERP Market | Five Best Practices for Implementing SaaS CRM )

Marc Benioff, the CEO of SaaS CRM vendor Salesforce.com, recently explained just why his flavor of the cloud computing model was best suited for today's troubled economic times. Forget big contracts with Microsoft, Oracle or SAP, and get beyond outdated hardware and software solutions, Benioff told CNBC in early October. Benioff said that Salesforce.com's "pay-as-you-go, elastic model" offers clients much more flexibility.

Recent predictions on the SaaS market appear to bolster Benioff's optimism. Gartner noted that worldwide SaaS revenue in the enterprise application markets was on pace to surpass US$6.4 billion in 2008, which is a 27 percent increase from 2007 revenue of $5.1 billion. By 2012, Gartner predicted, the market is expected to reach $14.8 billion.

But while there are elements of truth to Benioff's contentions and sound reasons that bolster Gartner's numbers, there is also a thicket of issues that those companies who rush into the cloud will soon discover. Here are five important considerations that business leaders and IT staffers must think about before they sign a SaaS contract.

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