SaaS Consumers: 'Don't Make Integration My Problem'

Several recent events including the acquisition of Cape Clear by Workday and the OpSource Connect announcement at their February SaaS Summit signal the beginning of a trend that I think will have profound impact on the SaaS industry. The trend is that 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 last year and why our go-to-market strategy has focused almost exclusively on partnering with SaaS ISVs and technology providers such as OpSource.

Integration has become a major stumbling block for SaaS ISVs in the sales cycle. Imagine the scenario where a SaaS ISV can sell its application for $50 per month per user (or similar) which users can begin using immediately but then has to tell its prospects that the integration will cost in the tens of thousands of dollars and take months to implement. Traditional on premise integration products have become the Achilles heel of the SaaS industry. They are simply too costly, complex and time consuming to be effective in the SaaS ecosystem. And the single instance nature of these products and the fact that they need to be installed and maintained on premise makes little sense in the multi-tenant world of SaaS where the action happens in the cloud.

At the same time, the strategic importance of integration is rising. In discussing some of the rationale behind the Workday acquisition of Cape Clear, (former) Cape Clear CEO Annrai O'Toole said in a recent blog post "...integration is at the heart of hosted applications - and not an on premise, bolt-on like other enterprise vendors believe..." I couldn't agree more. Workday has recognized that integration is not just an additional customer requirement that must be addressed but is in fact a critical and central part of its solution - a real competitive differentiator. A recent Saugatuck survey also underscores the rising strategic importance of integration. Survey respondents ranked the ability to integrate SaaS and on-premise workflows as the #1 business consideration when selecting a SaaS provider.

Little wonder then why the tendency of ISVs has been to sell around the integration challenge in the sales cycle. When addressing a prospect's integration requirements during the sales process, ISVs generally will promote their APIs as a means for integration to occur. Well constructed APIs are essential but not the "Holy Grail" to SaaS integration. For one thing there are very few small to mid-size businesses that have the developers to use APIs and companies at the enterprise level would prefer to put their precious R&D resources elsewhere. (An API opens up secure access to data but it does not accomplish the integration itself.) Then the approach is usually to sell professional services engagements to build the integrations "one off" on behalf of the customer. Unfortunately this approach 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.

The good news is we don't need to repeat the mistakes that were made in the past in the enterprise space where too many integration projects ran over budget, did not deliver the value expected, and were often done in a fashion such as custom coding and hard wiring applications that made ongoing maintenance and scaling a nightmare.

Integration itself can now be delivered as a service at a fraction of the time, complexity and cost of traditional on premise solutions. A major advantage of using integration as a service is that it abstracts the integration away from your customers. For example, making a change to an API or a schema can be done once in the integration service and all of your customers will be updated without making any changes to their setup or configuration. And because integration-as-a-service solutions are also SaaS, they can easily be bundled into application offerings - greatly facilitating and accelerating the adoption of SaaS technology.

In his recent blog post, Phil Wainewright discusses 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 this latter question is a resounding "yes" and Phil offers several suggestions including integration provided as a service within a platform ecosystem such as OpSource and independent integration-as-a-service plays such as Mulesource and Boomi.

In summary, SaaS ISVs who cannot afford to buy a company have the following options in developing their strategy for integration:

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. Doing so will allow you to focus your valuable R&D assets on building, perfecting, and innovating your "killer" 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 ISVs will move in short order to plug the integration gap in their offerings by bundling integration as a service for their customers.