SaaS Consumers: “Don’t Make Integration My Problem”

The recent acquisition of Cape Clear by Workday signals the beginning of a trend that I think will have profound impact on the SaaS industry.  That trend is consumers of SaaS are beginning to push back on ISVs saying in essence – “don’t make integration my problem.  I am buying a service and I want integration included in that service.”  This has been our view at Boomi since we began building Boomi On Demand two years ago and is why our go-to-market strategy has focused almost exclusively on partnering with SaaS ISVs and technology providers.

The tendency of ISVs has been to sell around the integration challenge in the sales cycle and to base their integration strategy around providing a set of APIs to their application.  Well constructed APIs are essential but not the “Holy Grail” to SaaS integration.  For one thing there are very few SMBs that have the developers to use APIs and companies at the enterprise level would prefer to put their precious R&D resources elsewhere.  Then the tendency has been to sell professional services engagements to build the integrations “one off” which pretty much defeats the benefits of a SaaS offering and becomes an enormous maintenance and scalability issue as the ISV grows.  I first wrote about this issue in an OpSource newsletter last September.

I believe there is growing consensus that integration is the #1 barrier to SaaS adoption and a recent survey by Saugatuck showed that the ability to integrate SaaS with on premise workflows is the #1 criterion of customers choosing a SaaS provider.  And I believe integration is the #1 strategic issue for SaaS ISVs going to market once they have their application built and hosted.

The acquisition of Cape Clear by Workday makes a strong and undeniable statement in the SaaS industry about the strategic importance of integration to SaaS ISVs.  It was important enough to Workday to acquire a company.  I agree wholeheartedly with (former) Cape Clear CEO Annrai O’Toole who said in his blog (http://www.capeclear.com/annrai/?p=29) “…integration is at the heart of hosted applications – and not an on premise, bolt-on like other enterprise vendors believe…”

SaaS ISVs who cannot afford to buy a company have the following options:

1. Continue to put the burden of integration on their clients
2. Sell professional services engagements and build custom integrations
3. Build an integration infrastructure on their own
4. Partner with Platform-as-a-Service or Integration-as-a-Service vendors to package integration for their clients

As I’ve said before, it’s a classic build-buy-partner decision but if integration is not your core competence, I would strongly recommend taking a hard look at the partnering option.

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 ISVs will move in short order to plug the integration gap in their offerings.

Comments

[Sankar]

It is true as ISVs transform and adopt SaaS,the landscape would see the increasing need for integration ,simple to complex.

Integration may play an absolutely key role to enable ISVs or Applications to be deployed on the SaaS model to meet their business objectives ( time-to-market, new customers,geographies ,revenues etc)

However,I think,some of the key driversleading to the adoption for Boomi kind ondemand Integration services could possibly emerge from

1)Capabilities of SaaS service providers also providing ISVs with Integration services (as value added services, one-stop-shop for ISVs ~ akin to how you one gets a domain name,email,storage and website build and other similar services from an ISP today..)

2)Proliferation of trained system integrators (SI Eco-system)who work back to back with SaaS providers to provide integration services an affordable cost(since the SaaS model itself is centered around an optimised cost model) OR Increased of Options for ISVs to use a third-party service provider demonstrated skills.(commoditisation of services = attractive cost options)

* Global delivery service providers stand to gain . (web based design & delivery and lower cost of services)

3)Emergence of Prebuilt,integration and process models (like templates) combined with Best practices which can help slash the integration time with predictibility and quality and cost for SaaS deployments (SaaS provider or System integrator playing a key role)- it is a win-win situation for ISVs and SaaS providers.

(ISVs could deploy early with confidence-keeping capital costs low while SaaS vendors can start billing ISVs )

4) Ability of Vendors to support Global customers seamlessly across geographies and time-zones upon SaaS integration.