Integration Speedbumps Loom Large with Software as a Service

By Doug Bartholomew  |  Posted 2008-03-03

To SaaS or not to SaaS, that is the question.

At least, that was the question on the minds of many of the more than 550 attendees at a software-as-a-service conference in San Francisco, Feb. 27 through Feb. 29.

Attended mostly by representatives of various software companies and other IT vendors according to a show of hands (fewer than a dozen SaaS customers were in attendance), the presentations at the SaaS Summit were aimed unabashedly at independent software vendors ( ISV) looking to start offering their software as an on-demand service.  

The overall SaaS business is poised for blistering growth, based on analysts’ predictions. According to projections by International Data Corp., the SaaS industry will grow at a 32 percent compounded annual growth rate over the five years from 2006 to 2011, from $3.6 billion to $15 billion. Over the same time, packaged applications are expected to continue to dominate the market, expanding from $110 billion in 2006 to $160 billion in 2011.

Even Microsoft is catching the wave.

“We view SaaS as the revolutionary way to deliver these services,” says Greg Urquhart, general manager of the U.S. ISV and SI partner business at Microsoft Corp. He defines software and services as “the combination of Web 2.0, SaaS delivery, service oriented architecture, and all these applications together.”

But if SaaS is being proclaimed as the greatest thing since the microchip, why is it that most large and many medium-size enterprises continue to run the vast majority of their mission-critical systems using in-house package software?

Are they missing something? Or are they just too-sober latecomers to a wild party that’s already been under way for several years?

At least one analyst believes their time to embrace SaaS more fully will come soon enough.

“Acceptance of Saas for mission-critical computing is clearly on the rise,” claims analyst William McNee, founder and CEO of Saugatuck Research. He pointed out that adoption of Saas in Europe taking place faster than in the U.S. “Many of the key technological barriers to using SaaS are falling, and SaaS will continue to evolve to address a greater number of customer requirements.”

Based on Saugatuck’s market research, McNee forecasts that by 2012, 70 percent or more of all businesses with more than 100 employees will have deployed at least one SaaS application, while only four percent of large enterprises are planning not to use SaaS. “By 2010, SaaS will be interwoven into the enterprise architecture,” McNee added. “In fact, I think the term, “software as a service,” will go away in five years, as we move to a new era of cloud computing.”

Maybe, but even the bullish McNee cited several areas where today’s SaaS offerings often fall short of meeting customer expectations. These include:

  • Ability to be personalized;
  • Workflow capabilities;
  • Customizability; and
  • Difficulty of integration.

These are some of the reasons that few large companies plan to use SaaS as a delivery mode for their enterprise resource planning (ERP) systems. Among Saugatuck’s survey respondents, ERP ranked eighth in demand for various enterprise applications to be tapped via SaaS.

“So far we have not seen software suites succeed in SaaS,” McNee pointed out. “SaaS will probably continue to be a best-of-breed world.”

In other words, most companies will continue to use single SaaS applications that offer particular functionality that they don’t already have or can’t easily add so economically.

One factor limiting the more widespread adoption of SaaS applications may be their redundancy. Much of what SaaS vendors offer is functionality that most businesses already have.

“A lot of SaaS is redundant software, so a lot of companies figure, why change?” observes John Casey, business development director for Pivotlink, a SaaS-based business intelligence software firm in Seattle. “If these SaaS vendors were truly disruptive and offered new functionality, these companies would switch.”

But by far the deepest pitfall that continues to concern many large companies kicking the tires of SaaS for mission-critical applications is the looming integration challenge it poses. “The question I hear over and over is, ‘How do I integrate it with the rest of the SaaS world and with my legacy applications?’” says Treb Ryan, CEO and cofounder of OpSource, which provides online billing, support, integration, and other services for SaaS vendors.

“Integration will be a problem with a vast majority of your customers when they try to integrate SaaS,” says Rick Nucci, chief technology officer and cofounder of Boomi, an on-demand SaaS application integrator, and a panelist at the conference. “The integration problem is twofold,” Nucci explains. “First, when the SaaS application is sold, usually there are one or more databases that are behind the firewall, and second, the SaaS company has to solve that problem over and over again with each customer,” he said. 

Panelist Leonid Igolnik, engineering director at the SMB division of Taleo, an on-demand talent management vendor, agrees, adding, “The APIs (application programming interfaces needed to connect different systems) are a very tricky part to get right.” 

And a third panelist, Simon Peel, senior vice president of strategy for Cast Iron Systems, a maker of integration appliances, asserted that once the SaaS has been sold, the customer then learns about the various integration issues surrounding synchronization of data contained in various databases. “We are only just beginning to attack the SaaS integration problem,” Peel said.  

Of course, the bigger a SaaS application gets, the thornier the integration thicket it becomes connected to. The Typical SaaS application starts out small with maybe 20 users,” says panelist Dave Rosenberg, CEO of MuleSource, an open source SOA infrastructure provider. “But later on, when there are more users, you have to apply some more ugly mainstream IT to it.”

A special problem companies can encounter when using SaaS is the complexity of trying to integrate different databases. “The odds of two companies have the same database, or even the same version of the same database, are so slim,” Rosenberg says. “Integration of customer databases behind the firewall is tricky.”

“The customers I see—even non-IT customers like HR users—are asking questions about integration of SaaS,” Igolnik says. Adds Nucci, “There is a perception problem having to do with false promises related to delivery times for integration.”

In conclusion, Peel noted, “Do not try to do this yourself at home—use an integrator.”