IPO-Readiness Checklist For SaaS

Eric Christopher

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It’s the big leagues, the dream: going public. However, the initial public offering (IPO) process requires serious work before you begin ringing bells and clinking champagne glasses. To get your house in order, you must consider your tech stack, data security, compliance, SaaS-related financials, quality assurance and ongoing tech strategy.

During the IPO process, the U.S. Securities and Exchange Commission (SEC) and other third parties will want comprehensive reports on how you run your business. In the digital age, a big part of how you run your business is what runs your business. Today, that “what” is software as a service (SaaS).

Companies that already have sound SaaS discovery, adoption and governance strategies are ahead of the game. Expansive enterprise SaaS knowledge prepares CIOs for the arduous filing process and for potential growth down the road. Having an IPO-readiness checklist for SaaS enables enterprises to prepare the enterprise-wide SaaS investment for the IPO process.

SaaS carries inherent compliance worries for IT, as well as severe data security risks if not properly managed. When combined with the rigorous IPO process, the weight of SaaS can be even greater. Secure your investments, free up IT resources and better prepare for future growth through this IPO-readiness checklist.

1. Discover all applications purchased throughout your enterprise.

Based on our customer data, the average enterprise underestimates the number of applications purchased throughout the enterprise by up to three-fold. In the case of mergers and acquisitions, this high volume of shadow IT, or IT applications that are used without the IT department knowing, presents challenges — especially in the case of security.

In this case, a manual SaaS audit is necessary. To manually capture all SaaS purchased, expense reports are the first place to start. Secondly, consult heavy SaaS investors and digital change agents within the line of business (LOB) to uncover SaaS applications that may not have been categorized correctly when expensed.

Once applications are discovered, uncover the respective contracts. Assign costs, functions and buyers to all applications. Begin documenting a SaaS single source of truth, or a single unified view of company data, that will be integral when preparing for IPO.

2. Lock-down SaaS-related financial reporting.

When going public, enterprises must meet the complex financial reporting and data security requirements of a public company. Many enterprises are looking to SaaS management platforms to guarantee the accuracy of the enterprise’s real-time system of SaaS truth. This real-time snapshot of SaaS-related financials provides a clear picture of application data, renewal cycles and actionable insights.

During the filing and review process, the SEC and bank underwriters will require all financial statements to ensure compliance with applicable accounting standards. By discovering and locking down your SaaS-related spend ahead of time, you can shine a light on shadow IT and build a comprehensive record to be referenced at any time during the filing process.

3. Measure and prove data security of all vendors and apps.

Even the most well-known, credible enterprises are susceptible to data breaches, causing widespread panic (and shares) to plummet. Today, companies preparing for IPO are put through rigorous tests to ensure data security of all vendors and applications.

One of the most common compliance frameworks for SaaS companies is service organization control 2, or SOC 2. Reaching SOC 2 compliance ensures the highest security and privacy of cloud-based customer data storage. Additionally, detailed SOC 2 audits allow for deep insights into the root causes of attacks, further preparing your company to go public.

4. Define quality assurance procedures and ongoing developments.

Lastly, detail how your enterprise measures and maintains quality assurance for future developments. In preparation for IPO, ask:

  • How do business units adopt and implement SaaS applications?
  • How does IT document and manage changes to SaaS?
  • How does the enterprise manage SaaS vendors?
  • How does IT ensure systems security?
  • What is the enterprise-wide protocol following a data breach?

If answers are unknown or incomplete, create an internal process for capturing and documenting all the implications of the enterprise’s SaaS footprint. A comprehensive SaaS system of record that documents application details, utilization and user feedback will not only prepare you for the IPO process but arm your enterprise with the insights necessary for future growth and development.

Ensuring overall enterprise IT health, including SaaS, is now crucial to preparing your company for IPO. By proactively following this IPO-readiness checklist for SaaS, full visibility and security of your enterprise-wide SaaS investment will be made possible.

About the Author

Eric Christopher

Eric Christopher is CEO and Co-Founder of Zylo, the leading SaaS management platform. After 14 years of buying and selling software, Eric knew there had to be a better way to manage cloud applications within a company. Eric started his career in sales at ExactTarget from 2002 to 2010. He spent the next six years in Chicago leading sales teams at Shoutlet and Sprout Social Inc., and founded Zylo in 2016.