Optimizing App Ecosystems

Optimizing App Ecosystems

August 26, 2021

How B2B SaaS companies can optimize App Ecosystems with a new approach to integration and partnerships

For a few years now, B2B SaaS companies have watched their customers’ thirst for business agility and faster time to market manifested by integrated workflows between two or more third-party SaaS providers. Customers are seeking user experiences that a single vendor can deliver only if its solutions include native, plug-and-play features derived from integrations with third-party ISV partners.

B2B SaaS companies have responded! The top 1000 companies each average 15 cloud integrations and the top 30 (the true platform players) each have 500+ cloud integrations. (Source: Pandium, 2020). Having a robust App Ecosystem and Marketplace is now a key driver of differentiation, higher ACV, higher TCV and greater customer retention

While the imperative of partnering with third-party ISVs to create connected workflows is well understood, this blog addresses two big SaaS industry challenges:

-Changing product leader mindsets to align product and integration strategies into an extended solution-roadmap vision. Given that a product leader might find thousands of possible integrations on a theoretical partnership “to do” list, how can one company keep up with the rising demand for new integrations while maintaining the ones they already have?

-Driving CEO alignment and accountability shared by product, GTM and partnering leadership. This goes beyond CEO announcements that ‘we are a platform company and we will build a world-class App Ecosystem and Marketplace.’

The Product Challenges

A big hurdle for product leaders is the immaturity and fragmentation of the integration landscape. After all, delivering superior customer experience, retention and differentiation through workflow optimization and data aggregation across connected applications is not easy to do, especially when the product team only owns part of that workflow.

Can iPaaS (Integration Platform as a Service) or EiPaaS (Enterprise iPaaS) help out here? iPaaS (non-native) integrations built by providers like Boomi and Workato can get a B2B SaaS offering into the market but cannot deliver the breadth or depth of connectivity that native integrations provide. iPaaS vendors don’t encourage product teams to develop and build integration roadmaps based on a hierarchy even though doing so is a very good idea. Our friends at Left Hook created this integration use case hierarchy:

In Left Hook’s estimation, most of the existing integration solutions sold into B2B SaaS are just beginning to scratch the surface at the lower tier use cases, and only for a small percentage of the integrations demanded by B2B customers.

Another challenge for product teams is that customer needs and expectations regarding integrated workflows are changing. According to ProfitWell, customer willingness to pay for integrations has declined by nearly 70% in the past few years whereas these same customers are willing to pay as much as 20% more for fully integrated workflows.  In response, iPaaS vendors offer SaaS vendors a white-label solution, but unfortunately, these solutions are expensive and don’t offer the governance or the higher-benefit use cases that native integrations can provide.

Where product leaders need to step up is in making a paradigm shift to ‘owning’ connected solutions and product roadmaps that are aligned with an App Ecosystem through an integration strategy. Ryan Lunka, who helps product leaders build native integration stacks at Blended Edge, said it best:

Product leaders should be thinking about integration as a foundational capability and move beyond viewing integration as a ‘feature.’ With an ‘integration capability’ mindset, leaders can prioritize the highest value integrations, build them right, and then deliver those integrations in a way that delights and empowers their users”

The Leadership Challenge

CEOs need to recognize that building an App Ecosystem is a four-team sporting event that he/she/they have to own and orchestrate across the key functional drivers:

-Product – which third-party solutions are key and how will we drive integrations that meet customer experience expectations?

-Marketing – how can we build and promote a marketplace to drive end-to-end solutions and quality leads to partner and sales teams?

-Partnering – how can we establish superior relationships leveraging a tiered, go-to-market, partner program?

-Revenue – how can we sell and co-sell with and through our App Ecosystem to accelerate & scale profitable growth?

CEOs need to align the four groups, hold each accountable for their separate contributions and interdependent activities.

Following Best Practices 

To make all this happen, we propose that B2B SaaS companies follow our recommended best practices in three key areas:

-Unify the product and integration strategy by creating an Ecosystem Access Layer to drive programmatic, tiered, native integration execution with third-party ISVs. The value of leveraging an EAL concept is to lower the cost, complexity and time for third-party ISVs to integrate with their core offering and increase the number and capabilities of native integrations that include feature hooks and open canvas approaches to embedding inter-app data sharing and functionality inside of your or your partner’s UX.

-What to avoid:

-Excessive reliance on iPaaS vendors that promise white-label, fast-time-to-market integrations disconnected from product strategy and optimal user experiences. Long-term these approaches are expensive and defeat the end-goal which requires native integrations.

-Pushing integration decisions and costs downstream to the partner team and ISVs; product teams need to own the end-to-end customer experience.

-Failing to think through the use cases and customer experiences that will dictate the integration and partnering strategies that will drive ecosystem and GTM success.

-Not thinking through the process and timing of platform adoption which lowers integration cost as ISVs ultimately pay to integrate to you vs the other way around.

-Build a wholistic App Ecosystem Strategy and Execution from your CEO down that includes product, partnership and GTM functions. Too often CEOs will say, we need a robust App Marketplace but fail to drive alignment across the key functions to ensure coherence and effective execution. Success in building robust App Ecosystems is a team sport requiring shared, cross-functional ownership for strategy and execution.

-Empower your partner teams with direction and a crawl, walk, run plan. Partner organizations need to start with three key inputs: a) which partnerships are most important, b) what is the desired customer experience (and hence the right, native integrations to drive that outcome) and c) what GTM motions will deliver the best collective win-win. Too often, partner leaders are left on their own to evaluate partners and become change management experts across reluctant product and revenue teams that are wedded to rigid, partner-unfriendly operating procedures. This backward partnering approach and lack of understanding of the App Ecosystem team-sport model is why many partner leaders find themselves without credibility and budgets to achieve meaningful business outcomes.

 If you would like to learn more about these best practices or ways to think through the creation of App Ecosystems and Marketplaces, please reach out to Allan Adler for a free consultation.