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Summary:

In the world of Software as a Service, integration is critical. It gets small SaaS providers in front of new potential customers already predisposed to buying cloud-based services, and it gives individual SaaS vendors a fighting chance against large software vendors with lots of products and salespeople.

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In the world of Software as a Service, integration is critical. For one, it gets small SaaS providers in front of new potential customers already predisposed to buying cloud-based services. Integration also gives individual SaaS vendors a fighting chance against large software vendors with lots of products, large sales teams and reputations built over decades.

After all, doing away with long, often restrictive, contracts with associated with legacy software is only a benefit if the numerous specialized SaaS applications a company uses can work together like their old software suites did. Otherwise, it’s just a lot of services to manage, and even more work to keep data consistent among them.

AppExchange is no question

For any SaaS or cloud-service startup, Salesforce.com’s AppExchange is a natural place to start. Salesforce.com is a SaaS juggernaut, claiming more than 100,000 customers and doing more than $2 billion a year in revenue. Companies that place themselves in its slipstream can get a taste of that success because it has done the heavy lifting of educating and convincing potential customers on cloud computing. AppExchange partners just need to offer a compelling product to complement customers’ CRM efforts.

Cloud-storage-and-collaboration golden boy Box.net, is one company singing the praises of getting involved with AppExchange. It’s not a magic potion that makes services irresistible to buyers, Box Co-Founder and CEO Aaron Levie told me, you still have to work and hustle to get business through platforms like AppExchange, but “it’s a cloud company’s dream” because customers already have the cloud computing mindset. If they’re already using Salesforce.com and are comfortable with cloud services in terms of use, security and other concerns, a company like Box.net can stand on its capabilities rather than on its delivery model.

Phil Fernandez, president and CEO of revenue performance management startup Marketo, can attest to the synergies between Salesforce.com and other SaaS applications. Although there’s nothing about Marketo’s service that’s inherently tied to Salesforce.com or CRM, in general, Fernandez told me that about 80 percent of Marketo’s customers have connected its service to Salesforce.com. In fact, he added, Marketo gets a fair amount of customer leads through AppExchange as well as from Salesforce.com’s salespeople suggesting third-party apps.

In part, that’s just a result of Salesforce.com’s prevalence, but it’s also indicative of the technological value of integration. The integration is so simple and so thorough, Fernandez explained, that the two services work like one uniform application.

Integrate everywhere

But Salesforce.com isn’t the beginning and end of SaaS. As Fernandez puts it, Salesforce.com just created such a large disturbance in the force in a huge CRM market that it behooves companies like Marketo to leverage its platform. Outside of Salesforce.com, there is an ever-expanding collection of SaaS offerings — some of which also are doing lots of business — and broad integration is critical. Some, such as Intuit QuickBooks Online and Google Apps, have their own growing partner platforms.

Box.net’s Levie is adamant about integrating everywhere in the SaaS world. Aside from Salesforce.com, he said some of Box’s most-active partners are up-and-coming providers such as Okta, GoodData and SnapLogic. Nearly every one of Box’s customers integrate the data they store with Box.net into other applications, he added, a process aided by Box.net’s very open API. Levie said the evidence shows that more-open APIs lead to more innovation, and that’s critical for the SaaS ecosystem.

Fernandez said that as Marketo looks to attract more small- and medium-sized businesses, his company will try to tie into the Google Apps Marketplace, which also has a large base of customers already sold on the idea of cloud-based applications. Already, he said, Marketo’s service might be tied into several different SaaS applications for any given customer, all functioning as an integrated suite.

Box.net’s and Marketo’s stories aren’t unique, though. Because no one SaaS company can, or even should try to, be everything to everyone, almost every popular provider has a broad partner ecosystem. Take a look at Zendesk, for example, which advertises dozens of integrations, including, not suprisingly, with Salesforce.com. Every provider has its own unique customer base, and exposing them to new, complementary products floats all SaaS boats because a meaningful integration means a better user experience and more business for everyone.

Inexpensive computing resources like those from Amazon Web Services have empowered anyone with a smart application idea with a platform to run it. Ultimately, someone should be providing a service for any capability a company might need, so — for a broad swatch of companies, at least — there really isn’t the need for the large, one-stop software shops of decades past. Unless someone gets greedy, it looks like integration is here to stay.

Image courtesy of Flickr user Global X.

  1. Yeap, I agree :)
    The big vendors we have today will need to seriously look at their licensing models, today they can still be competitive in the cloud market, but in a few years from now when companies are used to “renting” services, the software that the service is running on will be less important. Customers will get these services based on functionality and not based on what software is driving this service.

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