With SaaS, it’s not just about your apps — it’s how you connect those apps, too

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.