Integration and Expertise Matter More for SaaS
Posted by Bob Warfield on April 29, 2008
I recently had lunch with an executive one of the more successful SaaS startups in the Valley. Our conversation ranged far and wide over many topics, but eventually I wanted to understand their product differentiation. There are several players in the space, what had these guys been successful in emphasizing?
The answer was a surprise to me: integration with other SaaS apps. As he put it, “Our customers care a lot more about this than they used to when I worked for a perpetual software company in the same space selling to bigger enterprises.”
This was completely at odds with my logic before the lunch. SOA and fancy integrations had seemed entirely a feature that catered to giant Enterprise IT that had to have things their own way and were willing to boil the ocean to get there.
After a bit of further questioning, it became obvious why the SaaS customers might care even more than their big company counterparts. SaaS typical sells to SMB’s. These smaller organizations have minimal IT staffs. I once talked to a SaaS company whose professional services group had to deal with the CFO being the only IT staff that could answer questions and help get the software going. That’s small!
When you have a large IT group, you can afford to, and indeed, may even want to dedicate some of them to building the integrations. When you have a small group, if the vendor can’t do it for you, it probably won’t ever get done. So it isn’t that the little guys care more, they’re just helpless to get any kind of solution if they care at all.
What does this mean for SaaS vendors? In this case, having out-of-the-box tight integration with other SaaS vendors (or On-premises packages) was a big differentiator. It lowered the deal friction (less to worry about on the custom install side) and increased customer satisfaction (hey, we could never get these two systems to talk before!).
Today, I read in one of Jeffrey Monaghan’s posts the following:
It is important to be viewed as the expert when you are selling a product…but it is imperative when selling a service. Customers are buying a promise from you. And an expert is perceived as someone who is most likely to deliver. Everything you do should scream “We’re experts!” Collateral material, websites, even the way your sales team dresses.
Jeffrey is making a slightly different point than the integration point, but it’s really the same story again, isn’t it? Small businesses can’t afford to hire Accenture or somebody to come partner with their software or sevice vendor to help them out with “Best Practices” or “Business Process Re-engineering.” The software itself had better have all that built in, and the vendor had better look like the experts, and be prepared to help educate the customer as much or as little as needed. It can’t be an extra cost option.
This is just another thing I really liked about how Rally Development’s web site is set up. There is that perfect mirepoix of product marketing, best practices (and in their University, clearly there’d be experts there!), and community. Rally is just a site I came across by accident when two different people asked if I knew of them. Their site really resonated with my idea of what a small company should be doing with the web to get the word out.
How about you, are you the experts in your area? Shouldn’t you be?
Yves said
Hello Bob,
I cannot agree more with you about the integration part.
I have been working on complex integrations for the last 6 years mainly in the SAP world.
I recently moved to the SaaS industry, creating my own company with another colleague.
Our first goal was to bring something to the SME that were, at least in the ERP world, completely abandoned.
The move was also quite a surprise. We were coming from a pure SOA practices world and were discovering SaaS applications built as monolithic blocks.
If in the short term nobody will probably really bother, in the long term, when the SaaS model will be more commonly used, the lack of integration will lead the users to struggle with different offers and even have sometime redundancies.
Paying SaaS Catalysts to create integration is an expensive one and, again, SME can only be the poor guys in this story.
I don’t believe either in the current portal that are offering extension capabilities such as BungeeLabs, Coghead or Force.com (which is in my opinion already far too expensive for SME).
As you said, one of the benefits for SME is to not have to invest in IT departments. Even if simplified, those portals require some good technical skills and I doubt of the results when done by end users generally speaking.
I also doubt about the interest of external developers to such models where even the programming language can be proprietary.
So what? I believe in the mashupization of the SaaS applications. I believe that each application can be clusterized in small blocks that can live independently or in collaboration. It would be like creating a Netvibes portal for Enterprise MashUps with API integration facilities.
Yves
smoothspan said
Yves, welcome!
Thanks for your comments. Integration is something that’s really hard in the non-SaaS world, so it’s just one more great opportunity for SaaS to create a better experience. But only if SaaS vendors care!
Cheers,
BW
jeffreymonaghan said
Bob,
The more and more I hear from companies that are selling a service, the more and more I hear how important it is that the customer can rely on the service provider to be the expert in their field. And its not so much with just their service, but they are looking for an expert in the industry. That go to person that can be a resource and not just a vendor.
Regards,
Jeff
cebess said
There are a number of aspects of SaaS that companies going that route seem to be suprised about:
1) Integration and customization are important, as you pointed out. Everyone knows that they are special.
2) A special area in integration is security.
3) Change management will be a big issue. The service consumer will likely need some change management assistance as well.
4) Service Level Agreements within the data centre will not mean much if the service subscriber can’t get their work done.
smoothspan said
Charlie, welcome, it’s a pleasure to have you joining the conversation.
The idea that a special area of integration is security is definitely one I’ve had a lot of personal experience with. The larger the enterprise, the more special it gets and the less willing they are to compromise on their needs.
Best,
BW
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