SaaS Customers: Don't Make Integration My Problem

Don’t Make Integration My Problem!”

The Software-as-a-Service (SaaS) industry is changing due to popular demand. Consumers of SaaS applications are pushing back on independent software vendors (ISVs), saying in essence, “Don’t make integration my problem. I’m buying your application as a service and I want integration included.” Gone are the days when customers would subscribe to a SaaS application for $50 a month and then be willing to pay tens of thousands of dollars to integrate that application with the rest of their portfolio.

Most analysts covering the SaaS industry today would agree that integration is the number one barrier to the adoption of SaaS technology. The problem lies not in the SaaS technology itself but in the attempt to use conventional integration products and appliances for SaaS integration. Conventional integration products were built for traditional on premise software implementations – not SaaS.

The fundamental limitation of conventional integration products (whether hosted on premise or “in the cloud”) is that they are single-tenant. Each customer must buy, install and maintain its own copy of the product and must do so at every location where integration occurs. As a result, using conventional integration products to integrate SaaS greatly increases cost, complexity and time to deploy while also greatly limiting scalability. To date, ISVs have had little choice but to pass that cost and complexity on to the end customer.

Several events this year, including the acquisition of Cape Clear by Workday, signal the beginning of a trend that will profoundly impact the SaaS industry. ISVs are looking beyond conventional integration strategies because they’re simply too costly, complex and time consuming to be effective in the SaaS ecosystem. At the same time, the strategic importance of integration is rising.

Workday recognized that integration is not just an additional customer requirement that must be addressed, but it is in fact a critical and central part of its solution – a real competitive differentiator. Integration is the lynchpin of successful SaaS deployments. A recent Saugatuck survey underscored this point. Survey respondents ranked the ability to integrate SaaS and on-premise workflows as the number one business consideration when selecting a SaaS provider.

Choosing a Strategy that Works

Though integration is clearly a priority for the consumer, ISVs were in an awkward position. Lacking a better solution, the tendency of ISVs has been to sell around the integration topic in the sales cycle. When addressing a prospect’s integration requirements during the sales process, ISVs generally promote their application programming interfaces (APIs) as a means for integration to occur.

Well constructed APIs are essential to SaaS integration, but they’re not the “Holy Grail” that’s been promised. An API opens up secure access to data but it does not accomplish the integration itself. And in addition, there are very few small to mid-size businesses that have the developers to integrate between APIs, and companies at the enterprise level would prefer to put their development resources elsewhere. In these cases, ISVs had little choice but to offer professional services engagements to build the integrations on behalf of the customer. Unfortunately, this approach reverses many of the benefits of a SaaS offering and it becomes an enormous maintenance and scalability issue as the ISV grows.

The good news is there’s no need to repeat the mistakes made with enterprise integration in the past. Integration itself can now be delivered as a service at a fraction of the time, complexity and cost of conventional integration products and appliances. For the first time, ISVs have an integration option for customers – one that aligns with the SaaS business model, namely on-demand integration.

On-demand integration is itself built using SaaS technology. Just like SaaS applications, it is a single instance, multi-tenant platform hosted in the cloud. There is only one platform and all customers use that platform for integration. As such, it natively delivers all the great values of SaaS: rapid time to deployment, faster innovation cycles, ultra-low cost and infinite scalability.

On-demand integration radically alters the economics of purchasing integration. Customers can buy only the services they need and not pay for an entire integration product or products. It has a dramatically reduced cost structure because everyone leverages one platform. On-demand integration finally aligns integration cost with that of on-demand applications – an issue which has been a major barrier to sales for SaaS ISVs.

On-demand integration also eliminates the cost and hassle of maintaining and upgrading each instance of a conventional product. In the on-demand world, upgrades and enhancements to the common platform are continually released to the user community and everyone enjoys the benefits immediately.

And importantly, on-demand integration allows ISVs to lift the burden of integration off the shoulders of the end customer. On-demand integration allows SaaS ISVs to offer bundled and pre-built integration as a service – solving integration on behalf of the customer. Since the customer is buying the application as a service, it only makes sense to buy the integration as a service.

Integration Options for ISVs

In a blog post, Phil Wainewright discussed the acquisition of Cape Clear and asks the question, “Where, by the way, does this leave other SaaS vendors and should they, too, be considering whether to package up integration capabilities with their on-demand offerings?” The answer to the latter question was a resounding “yes,” and Wainewright offered several suggestions, including integration provided as a service within a platform ecosystem or independent integration-as-a-service vendors.

In summary, SaaS ISVs have the following options in developing their strategy for integration:

  1. Continue to resell conventional integration products and appliances
  2. Sell professional services engagements and build custom integrations
  3. Build an on-demand integration infrastructure on their own
  4. Partner with integration-as-a-service vendors to package integration for their clients

It’s a classic build/buy/partner decision, but if integration is not an ISV’s core competence, partnering is an ideal option. This allows the ISV to focus its valuable development assets on building and perfecting its core application or service.

Integration is quickly moving from a non-core offering of SaaS ISVs and technology providers to a strategic imperative and source of competitive advantage. Forward-thinking vendors are already plugging the integration gap in their offerings by bundling integration as a service for their customers. In the not-too-distant future, providing affordable integration coupled with application services will become the industry standard.

Consumers are flocking to the SaaS paradigm because it saves them time and money, and by providing integration as a bundled part of an offering, ISVs can offer a great service to their customers while increasing win rates and accelerating sales.

About the Author

In August 2006, Bob was appointed President and CEO of Boomi. Bob first joined Boomi in late 2005 as an advisor and member of the board of directors and has led the company’s strategic shift into the SaaS integration market.

Prior to joining Boomi, Bob was group president at MAXIMUS and president of the global education software business at SCT where he led the company to ten consecutive record-setting quarters of growth. Bob began his career with EDS initially as a systems engineer and advanced into senior management positions including director of EDS’ operations in Hong Kong and China, and executive director of its federal government business in Australia. His 27-year career has spanned all aspects of IT services, software and consulting in executive leadership, technical management and engineering roles.

Bob graduated from the University of Maryland, University College, with a Master of Science degree in technology management. He also completed executive programs at the University of Michigan Business School and the Center for Organizational Learning at MIT. He serves on the advisory boards of several start-up companies including Rave Wireless, Intelliworks, and Provost Systems (acquired by Edison Schools).

More by Robert L. Moul