May 20, 2009, 3:02 PM — One big obstacle to SaaS vendors getting their applications adopted more widely is that so many of them don't offer open APIs. Offering APIs is crucial for vendors to get their applications supported by channel partners and for customers looking to integrate SaaS offerings with legacy applications, said participants on the panel for a lively but lightly attended session Tuesday at Interop in Las Vegas dubbed "Herding cats: Managing SaaS sprawl."
[ View Interop product slideshow ]
"It's stunning to me the number of SaaS companies that don't even consider an API as part of the development cycle," says Treb Ryan, CEO of OpSource, a company that mainly helps SaaS vendors deliver their offerings to businesses but is also now extending its services to enterprises running their own clouds. "Lord knows two Web developers in a garage know to put out an API. [For SaaS vendors not doing this it's] killing them."
Panelists said providing an API that channel and integrate partners could cut the cost of acquiring customers for SaaS vendors.
"Customer acquisition is the biggest cost," said Tim Dilley, executive vice president, worldwide services and chief customer officer for SaaS vendor NetSuite. "The general notion of having a robust API to data is a critical jumping in point" for SaaS vendors wanting to play in the enterprise, said Narinder Singh, founder of Appirio, a company that helps customers exploit on-demand applications.
Still, Bob Moul, CEO of application integration company Boomi, said "channels are still evolving" around SaaS products, so there's still time for SaaS companies to find a fit with new and traditional integrators.
One difference that SaaS vendors are already seeing is that a lot of their sales go through line-of-business chiefs rather than CIOs or the IT department, panelists said.
"IT doesn't even come into the conversation," Ryan said. "It will create some interesting issues; SaaS sprawl could be an issue."
One reason that this is naturally occurring is that there aren't a lot of SaaS suites for some of the more popular application categories, such as human capital management, Ryan said.
Though Boomi's Moul said SaaS vendors "need to embrace the enterprise and CIOs" since once an application starts being used by more than one department, IT will inevitably need to get involved.
NetSuite's Dilley said he's seen evidence over the past six months that CIOs actually are getting more aware of SaaS. This is important because overseeing a SaaS environment is much different than overseeing a traditional application environment – with SaaS, for example, upgrades might be continuous whereas traditional apps were more likely to undergo big upgrades only every six months or more, he said.
Dilley argued that demand will remain for suites of applications, as evidenced by NetSuite's success selling ERP and CRM bundles, but others said there will also be plenty of buying on an application by application or even feature by feature basis.
"While the history of business apps is suites, the history of the Web is not," Ryan said.
Singh said he doesn't see suites going entirely away but does foresee a more heterogeneous applications environment. "How customers get support and how stuff works together, it's unclear how that gets resolved," he said.
Among the other concerns for those in the SaaS industry is standards creep. Singh said he's concerned that new compliance and standards efforts could be used by those who are behind in the SaaS game to slow things down enough that they can catch up. "Standards…too often slow innovation," he said.
An audience member raised the specter of uncertainty caused by potential industry consolidation. Panelists agreed that consolidation will happen given that there are thousands of SaaS vendors, and Ryan even tossed out that one likely aggregator is Larry Ellison of Oracle. "You can't have listened to Larry 10 years ago going on about the network computer and don't think he believes in SaaS. You have to believe he's sticking cash in the bank now and then when one of these companies gets big enough he'll pull out the checkbook."
