The benefits of software as a service make it a relatively easy sell--lower up-front investment, accessible from anywhere via the Internet, no more expending scarce in-house resources on glitchy enterprise software updates and patches. And it's no longer a binary choice between in-house or service, as there are hybrids within almost every category. Even big enterprise software vendors such as Microsoft and Oracle offer SaaS versions of the bloated applications you've been fighting with for years.

The challenge for IT now is threefold: Make line-of-business managers aware of the gotchas inherent in SaaS; update the review process to include SaaS-related functionality for every technology purchase; and expand the decision checklist to cover key requirements for SaaS initiatives that might not be readily apparent, such as expanded bandwidth needs and integration costs. In this article and our InformationWeek Special Report, at informationweek .com/1182/report_saas.htm, we'll help with all of these, share results of our March survey of 374 business technology professionals, and rate five popular SaaS categories on their current risk/reward ratios.

Let's start with your standard enterprise application review process. These vary by organization, but in our experience most combine feature, benefit, and cost decision points into a good old-fashioned checklist from hell. Take the time for a high-level definition and goal-setting exercise. The result will be a clear set of business pain points--until you define a problem, you can't solve it. Once you get your business-needs definition, move on to application implementation goals, general vendor requirements, must-have and nice-to-have features, and the big budget picture. We cover this in more detail in our Special Report.

If acquiring the application on a service basis is on the table, there are a few SaaS-centric evaluation points that you neglect at your peril. First, integration tools and support. It's wrong to consider any SaaS app as a standalone item. At the top of your evaluation checklist should be the tools and kits the vendor provides for back-end system integration. One survey respondent recently abandoned a long-delayed CRM-to-Exchange calendar link after repeated attempts to get a reliable connection failed.

Next, know what data analysis options the SaaS app provides. Canned reports and exports are nice, but most vendors charge extra for direct database access or customized reports. Another item to check is the vendor's ability to merge or consolidate data in the case of acquisition. One respondent to our reader survey cited data access as one of the biggest downfalls he's found regarding SaaS: "When hosted externally, databases are usually considered proprietary. If we want to analyze our own data it becomes a three-month project with huge costs."