Recently, I read an article called “For IoT, think about creating a minimum viable ecosystem” on Stacey on IoT blog, which got me thinking about what we ourselves have been observing in the SaaS sector. In particular, the article says: “With the internet of things, companies are no longer trying to create a product to offer value, but rather establish relationships between companies and individuals to create value. But to understand how those relationships should develop means that product designers need to think about not just a device but how to establish relationships between entities that will work with a device”.
Apparently, IoT companies have recognized the trend that many SaaS companies still have to pick up on. If we translate the aforementioned quote into the terms related to the software-as-a-service industry, it’s less about building a great product nowadays and more about establishing relationships with other products and systems, while creating value by doing so. In other words, it’s about building software ecosystems from the start.
Your software is just “one of”
Indeed, if you come to think of it, you need to look at your own product from the customer’s perspective. Your software product might be the legacy you want to be remembered by, your way to contribute to society, or your answer to a – in your eyes – important, unsolved business problem. How can others possibly not see that they need it? But for your clients, it is most likely just another application, one among dozens or hundreds they already have. Even more so, there are probably other software solutions like yours. Not quite the same, but still, close enough.
And so, if your product is “just another software solution” in customers’ view, how can you ensure that they will stick with it instead of going to your competitor? And here is where the “ecosystem” concept comes into play. For your customers, your product should become a natural addition to their existing software ecosystems, where it will work with their own IT estate, and work well.
Interoperability is key
One way to ensure this is to build a network of partners and provide native integrations. There is already a huge shift in many SaaS vendors’ mind in this respect. If five years ago I would rely on a third-party integration service to connect some of my applications for simple tasks, now almost every software tool I use offers an integration of some kind. With Slite, for example – an app for notes I just looove – I can share a note directly in Slack or attach meeting minutes to a follow-up meeting in Google Calendar.
The only problem is that there can be only so many native integrations. So, even though such integrations do offer some added value and can also have a significant positive influence on your pricing and revenue model, in reality they are typically not flexible and customizable enough to address customers’ individual needs and guarantee customer retention. To be honest, I’m not sticking with Slite only because it provides integration to Slack and Google Calendar; many other apps do the same.
Betting on the number of native integrations to ensure added value is also an unsustainable approach. Our CEO Renat Zubairov already explained this in his recent article “The SaaS subscription business model needs a new twist – and here’s why”. And so, we’re back at square one.
Embedded capability for building software ecosystems
Another way is to build a universal integration capability into your product. Salesforce, a pioneer in cloud-based applications, also became a pioneer in ensuring the interoperability of its products with other IT systems when it acquired Mulesoft, an iPaaS (integration platform as a service) provider, back in 2018. The famous CRM vendor set an example and a few other companies followed.
It doesn’t mean that every SaaS provider must buy its Mulesoft. It’s not about the vendor but the concept of including an iPaaS into your own Minimum Viable Software Ecosystems. One way to do that is to form an actual partnership with an iPaaS provider, with them doing the integration job on your behalf. While this is certainly a good option, it might not sit well with your customers, though, as they will have an additional software vendor to negotiate with.
One more option is to make use of the white-label iPaaS offerings out there and provide it to your customers under your own brand. Of course, let’s not fool ourselves – adding a universal integration capability through a white-labelled iPaaS doesn’t mean that you suddenly will provide hundreds and hundreds of integrations over night.
But it does mean that you will equip your customers with a tool to build any kind of custom integrations considerably faster and with less efforts. Not to mention the monitoring and logging capabilities that come with it. Plus most iPaaS offerings already have a rich library of ready-to-use integration connectors for mainstream business applications. This will give you a good jump start to ensure your product fits in nicely with your customers’ existing IT and software ecosystems.
Don’t lose sight of the big picture
To get back to the topic of building MVEs – Minimum Viable Ecosystems –, it pays off to not lose sight of the big picture, which is that your software product will probably never be used as a standalone solution. The better you are prepared to ease its way into your customers’ IT estate, the higher the chances are, your customers will stick with you. To paraphrase the conclusion in the Stacey on IoT’s article, “tomorrow’s big companies are being formed today, and those that view their products within an ecosystem will likely fare far better than those that limit themselves to a single” software solution.