SaaS Companies Doing Well, Thanks in Part to Integration

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The rest of the country may be struggling with a recession, but apparently, software-as-a-service companies are "at the forefront of the economic recovery," claims a new benchmarking report on the industry. One key reason the industry is doing so well: SaaS companies are getting better at integration, according to a recent Integration Developer News article.


That's a key shift from SaaS' early years, when SaaS integration ranked just below security as an obstacle to adoption.


Five years ago, even many large, public SaaS companies were unprofitable, according to The 2011 Software Benchmarking Industry Report. Now, most are not only profitable, they require less capital to become so. SaaS companies are doing well at obtaining investment capital. The article notes "almost all of the small SaaS companies we benchmarked are venture backed with an average of $10M in investment capital under their belts, whereas the larger private SaaS companies had taken an average of almost $40M in venture investment."


Lauren Kelley, CEO and founder of OPEXEngine, told Integration Developer News the main reason for their success has been the improvements made to the cloud-based infrastructures that support SaaS. It's lead to improved services and wider availability, as well as lowered the cost of hosting.


But integration - particularly with on-premise data and systems - also ranked highly as a reason for SaaS' growth. IT lowered its resistance to SaaS, which helped with many of what Kelley called the "soft" integration concerns. That said, there are still technical challenges that remain, she added, although the story did not delve into specifics.


It's situationally ironic, really. These days, the big issues for companies adopting SaaS isn't how to integrate with SaaS solutions, but rather how to avoid SaaS silos.


A maturing business model and discipline are also reasons for the success of SaaS, the article states.


This isn't the only report recently that's touted the success of SaaS. Hollis Tibbetts, a middleware expert, notes that a recent report from Gatepoint Research found the typical company has an average of two or more SaaS/cloud applications today. That report also predicted the number of companies that will implement at least four SaaS/cloud applications will double over the next two years.


Tibbetts contends that study actually underestimated the growth of SaaS and cloud data. What's more, I don't think he's buying the idea that SaaS integration headaches are over:

"My next column ... will talk about additional complications that this report foreshadows, and why it's clear that the nature of data and application integration must change as well. Finally, if you think that Cloud & SaaS Integration isn't something to be concerned about, take a look at the following graph I borrowed from In(tegrate) the Clouds. Graphs like this which show geometric increases as you move up and to the right should make IT executives concerned....

The Gatepoint Research report, "2011 Application Connection Priorities," is available for free download thanks to SnapLogic.


The 2011 Software Benchmarking Industry Report, which was produced by the Software & Information Industry Association (SIIA) and OPEXEngine, isn't available for free as far as I can determine. If you're interested, you can purchase it for $1,995 if you're not a member of SIIA. The price for members if based on company revenues, starting at $0 for SIIA members with revenues under $10M and going up to the full $1,995 for member companies with revenues over $10M.