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Summary:

Competitive advantage used to come from using pricey enterprise applications to create operational efficiencies. Ross Mason of MuleSoft says SaaS and APIs have killed that model, and the future belongs to companies that integrate applications to discover new business models.

competitive advantage
photo: Shutterstock/andrea michele piacquadio

Enterprise applications have long been a means for companies to gain competitive advantage. The process would go something like this: The better the information and process flows, the more efficient the business, which in turn lowered the cost of doing business, which then created a competitive advantage.

Demand for this improved information flow had major players like SAP, Siebel and Oracle supplying a market with enterprise applications – which would need huge amounts of manpower and resources to be customized to suit the needs of a particular business. Applications grew to become suites of applications, with vendors aiming to provide a one-stop shop for every need. The original premise was that implementation of these application suites would typically occur over the course of years and run into the millions of dollars.

Then the cloud came along and changed everything. Now, the competitive advantage belongs to companies that find newer efficiencies through tightly integrated SaaS applications– and in the process uncover new opportunities. It’s this idea that inspired me to found MuleSoft, which is now the most widely used integration platform for connecting SaaS and enterprise applications in the cloud and on-premise.

SaaS disintegrated the application suite

Software as a Service (SaaS) has quickly blossomed and become the fastest-growing software market ever. Forrester estimates that by 2020 the SaaS market will hit $125 billion in global revenue, with 2012 projected to hit $20 billion. The appeal of SaaS is clear: With its attractive economics and frictionless deployment, its impact on the way enterprises now operate is immeasurable.

SaaS completely disrupts acquisition and maintenance models for enterprise applications. It offers fast implementation with little to no need for customization. SaaS applications are managed to a Service Level Agreement (SLA) by the vendor, which removes the costs of maintaining hardware and software in a data center, as well as the cyclical upgrade burden. Furthermore, SaaS applications tend to be more robust, since thousands of customers battle-test the platform every day.

SaaS offerings tend to be targeted at specific business problems. This disintegrates the traditional enterprise stack and means customers are no longer purchasing entire application suites. Instead, enterprise customers are able to pick and choose and then subscribe to best-of-breed point solutions for CRM, ERP, marketing automation, talent management, expense management and many more. Each of these point offerings look pretty much the same for every customer.

Traditionally, integration has been the pain point for getting siloed applications to work together. With SaaS, this pain can be amplified since there are potentially many more applications to integrate. Say a company needs its Salesforce CRM talking to its Workday ERP, and the SuccessFactors Talent Management system integrated with payroll and ERP, as well as Marketing automation and eCommerce applications talking to its CRM. Things get complex fast, and the number of integration points multiplies the more applications you need to connect.

APIs and the integration challenge

The advent of APIs for SaaS has revolutionized the way organizations can connect applications together and create new business models. With SaaS, you can pick and choose individual SaaS applications to run your business, connecting them together through their APIs. But even with APIs, each application is still different, which creates a challenge in finding a bridge to get the applications working together. (So, for instance, while SalesForce CRM and Workday ERP both have an API, they don’t know how to talk to each other.) Typically, integration needs to synchronize information between two or more applications, providing data transformation, security, reliability, visibility and error handling. Ideally this all happens in real-time so that your applications don’t get out of sync and users are always working with the most up-to-date information.

To further complicate matters, most organizations will have on-premise applications but want to adopt SaaS where it makes sense. To realize the benefits of SaaS without disrupting IT infrastructure calls for a new type of integration approach: one that enables connectivity on-premise, or cloud for SaaS and traditional on-premise applications.

Getting ahead of the competition

SaaS levels the playing field, theoretically giving all companies access to the same applications and tools. The atomization of enterprise applications means that companies can pick and choose the best applications for their needs rather than settling for ‘good enough’ application suites as before. Thus the enterprises that figure out how to make SaaS part of their application landscape will be best able to compete. The rest will be outpaced by the newcomers that understand how to integrate SaaS applications to build new business models, grabbing competitive advantage.

For this to be possible companies need an integration platform that provides connectivity for all their applications whether it be SaaS applications such as Salesforce.com, NetSuite, or Workday; or on-premise such as SAP, Microsoft and Oracle. But its not just about connectivity, its about reliability and agility.  The connections between your applications need to be working silently in the background. You need analytical visibility to the information running through your applications to help tune your business and discover new insights. And you need to be able to respond quickly to changes in your business model, processes and applications.

In short, your company’s competitive advantage is no longer in the applications you use, it’s in the platform you choose to connect them with.

Ross Mason is the founder and CTO of MuleSoft.

Photo courtesy of Shutterstock/Andrea Michele Piacquadio.

  1. No offense Ross, but you seem to be in 1 of 2 categories: 1) A guy who has never written a significant amount of code, but throws around API to sound like he is in the know, 2) or someone who has worked in development, but not in the last five years. Everything is API now – it is simply an extension of your IP. Nothing more, nothing less. APIs extend functionality, but are really meant for marketing in the sense that they let you hook into other things for good, or for bad.

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    1. Jason, you seem to ba a person that makes judgements without any data or insight. Not sure who you are so won’t make any claims to what you have or have not done, but given that I wrote Mule (and remained heavily involved with its development) that has become the most widely used integration platform, I can safely say that I have written a significant amount of code. If you actually read the article but its not about APIs, its about connecting applications to gain competitive advantage. Also, APIs are not simple extensions of your IP. There are many more facets to an API that live outside of just developing an API. For many companies an API should be treated like a product.

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  2. Daniel Barnett Sunday, November 25, 2012

    “Everything is API now”
    Agree 100%, we built the API first and then built our product on the API.

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  3. Apps are what is needed to make your smartphone smart and unique.Im fond of app creating and find it really helpful to use site like Snappii where i can build apps in hours. I have already published some apps available in the Appstore and Google Play.

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  4. Connecting all the apps you work on in one place is exactly what IQTELL does. Combining platforms like iCloud, Google, Yahoo, Outlook, Evernote, Dropbox and more to work in one place and enhance user productivity.

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  5. Nothing but an advertisement.

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  6. Stefan Töpfer Monday, November 26, 2012

    Ross, I very much disagree with your view of the SaaS world.

    APIs or often used to fix shortcomings of software applications and gloss over the fact that most vendors don’t have the resources or knowledge to produce a integrated solution.

    More and more solutions emerge which are integrated, i.e. from vendors like SAP, WinWeb, etc.

    The benefits of integrated solutions are too numerous to mention here. But when you talk about ‘discovering new business models’ – you are simply talking about integrated SaaS models.

    APIs have their place, but clients should never be involved in setting them up – it is a barrier to adoption. The worlds businesses are not only run by geeks.

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  7. Hi Stefan, Great PoV. I actually agree with you in part. What you are talking about is productization of integration so the end user is not aware that there is integration between two APIs taking place. On our cloud platform, CloudHub, we work with SaaS vendors to enable them to provide integration solutions to their end customers. We work with nearly 50 SaaS providers to provide hundreds of their customers integration solutions without the customer being aware of it. This business model would not have be possible without APIs since they normalise the integration to the point where we can productize a solution efficiently.

    However, the API also empowers the end users directly (if they have any IT delivery capability) since they now have programmatic access to their there data in their SaaS applications. Note that nearly 50% of all traffic served by SalesForce.com is served via their API, not the SaaS application. This means thousands of people are leveraging that platform to drive that business through integration.

    Today, SaaS allows people to set up a company IT infrastructure in a few hours without ever running software in a hosted environment. The next wave of innovation here is how easily these applications can be set up to connect with each other. Packaged integration solutions from the application vendors is one approach where we are seeing success here.

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