Originally contributed by our friend Barrie North from Compass Designs

The secret of growth for SaaS companies is a strong integration strategy, leveraged by a robust API connected to integration platform ecosystems like Zapier and IFTTT.

If it isn’t already apparent, the future of computing has firmly left the desktop for the cloud. The trend probably started with the face-off between Microsoft Office and Google Docs. This represented an inflection point between two models, one that had reigned for a decade: desktop software that came on a CD, and an office suite made possible by the ubiquitous availability of a web connection (hello Starbucks!).

Fast forward a few years and we have seen the trend accelerate. It seems Quickbooks Online has taken over from desktop Quickbooks and Google Drive has replaced, well, drives.

Several things have powered this trend. At the same time customers began accepting software to which they subscribe rather than own, there has been a huge increase in the near continuous availability of broadband to use these services. This has led to huge growth in the use of “Web Applications” or Software as a Service – SaaS’s.

 

SaaS Growth is Old News

The growth in the number of SaaS companies has been huge. Find any forecast and the trend is clear:

 

We see this anecdotally. Take one example, the CRM database. In the last decade the number of CRM solutions in the cloud as SaaS has exploded.

Source SaaS in NYC: 2015 Overview, Primary Venture Partners

All this is great news for SaaS customers. The explosive growth in SaaS companies has meant more offerings and greater access to better solutions that are more affordably priced.

For the SaaS companies themselves, more competitors might be perceived as a bad thing. But perhaps it has evolved into a marketing opportunity instead.

Some have pointed to a recent trend in which SaaS companies are growing faster than ever before. Younger companies seem to have more accelerated growth compared to older companies:

Source: https://tomtunguz.com/saas-revenue-growth-rates/

Tunguz explains:

“SaaS companies are growing faster and more efficiently than ever before. ….[with] new sales model of acquiring customers with B2C2B techniques by attracting end users through app stores…… [have] created an enormously attractive growth engine.”

One hypothesis might be that the increase in these “App Stores” has made it so much easier for co-marketing opportunities. One can make the analogy to the “Fax Machine Principal.” If you are the only owner of a fax machine, it is not that attractive or useful.  But as soon as more people have them, the more people want them.

A similar thing is happening with SaaS’s. As more have embraced the idea of offering rich integrations with other platforms, there are more platforms to integrate with, making the whole SaaS thing more attractive to customers. It is not a zero sum game.

In particular, this has been driven by how open APIs have become a key aspect in growth. A stellar API means that it becomes easier to integrate with your SaaS. Easy authentication and the use of RESThooks will lower the barriers for other web applications to build and offer connections to your web app, which opens up avenues to attract and retain customers.

Mailchimp in particular leveraged this strategy aggressively, and arguably was ahead of its competitors in pushing integration. We believe that integrability is a major driver of Mailchimp insane growth over the past five years.

 

The Rise of the iPaaS

This focus on making integrations easier through robust APIs has perhaps led to the rise of a newer type of service: the Integration Platform as a Service, or iPaaS. These are cloud-based systems to integrate other applications. Initial solutions like MuleSoft and SnapLogic were enterprise level iPaaS’s, but now we have seen more SMB solutions like Zapier, Tray.io, and IFTTT.

All of these are characterized by a core concept: connect/integrate your SaaS once to the iPaaS platform, and instantly integrate with all the other SaaS’s on that iPaaS. To take Zapier as an example, it claims over 650 web apps connected on its platform.

Connect with a Global App for your SaaS, and you immediately become part of their ecosystem, allowing your customers rich and extensive integration opportunities. Getting onto an iPaaS platform involves building a specific connection from your API to it.