Why SaaS Providers Want to Give You Packaged Integration

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I'm fascinated by the SaaS integration story.


I mean, here's a business model that's relatively new, and unless you're SalesForce.com, there's a good chance you're trying to win over companies and customers from the traditional, on-premise approach. And yet-many SaaS companies leave customers hanging when it comes to integrating with on-premise apps and data. I find that just ... odd.


Frankly, I'm pretty sure the only reason SaaS companies have gotten away with it is that they sail straight to business users who don't have the foresight to ask about it, leaving IT to clean up and connect the integration pieces - or hire a third party to do so.


Of course, not all companies take that approach. Some SaaS providers partner with integration companies to package connectors with the product. In fact, Boomi believes so much in this approach, the company bet its business model on it.


What's been unclear, however, is which model - or indeed whether either integration model - would win out-the "integration is your problem" approach or the prepackaged integration model.


After talking with Chandar Pattabhiram, the vice president of Channel and Product Marketing for Cast Iron, I think the pre-packaged integration model may have the edge.


Cast Iron is best known for its integration appliances, but over the last couple of years, it added SaaS integration services while still continuing its appliance line. Cast Iron handles behind-the-scenes integration for the likes of ADP and Dell Integration Services. Microsoft, SalesForce, Google, Oracle, VMware and Cisco are also clients.


I asked Pattabhiram which type of customer dominates in seeking their cloud solution - individual companies or SaaS providers wanting to package integration. Both, he said, but the real growth has been in SaaS providers wanting to leverage Cast Iron behind-the-scenes.


The reason? SaaS companies are realizing that if you control the integration, you're more likely to keep the customer.


"Integration is the loyalty app for SaaS," Pattabhiram said. "The more integrated you are, the harder it is for customers to cut the cord and the less churn there is."


During his presentation, Pattabhiram shared data that supports this thesis. For instance, integration remains a top issue with customers, ranking just below the number-one concern-data and privacy. In fact, a 2009 Saugatuck Technology Global User Survey found that 32 percent of companies cited concern about integrating SaaS with on-premise applications, compared with 39 percent who cited data and privacy. Interestingly, application integration ranked higher as a concern than data integration, which 27 percent cited as a concern.


But perhaps more telling is a Gartner survey of companies that are abandoning a SaaS solution in favor of an on-premise approach. The top answer, with a 56 percent response, said it was because the integration requirements between on-premise applications and SaaS integration had become "too significant."


Certainly, those are stats worth bringing to the negotiation table if you're talking with a SaaS vendor ... if you don't mind the tempation to stay that comes with pre-integrated solutions.