Understanding the Hybrid SaaS Ecosystem

In order to create a more feature-rich application, some SaaS vendors have created an ecosystem. This is a set of partners that works directly with the vendor, both in technical and go-to-market terms.

How the ecosystem works

This is how it works: A SaaS vendor with thousands of paying customers opens its programming interfaces to other ISVs. These ISVs can then build on top of the SaaS vendor’s infrastructure. They, therefore, don’t need to write and deploy an entire application, but can focus on their industry-specific code. Messaging middleware, business process services, and other complex programming have already been taken care of by the SaaS vendor that created the ecosystem.

Perhaps the most significant advantage to working in the ecosystem is that the SaaS vendor already has thousands of happy and paying customers. After a partner creates an application, it can market its software through the SaaS vendor’s portal in addition to using its own traditional sales force. This has become a standard model used by SaaS vendors to build their brand and power in the market.

Finding out who builds in SaaS vendor ecosystems

ISV partners can be broken into two general categories: small startups and larger, established companies. It might be clear why a small company with limited resources might want to build on top of the Salesforce.com platform, but if you’re a large player with your own customer base, why use Salesforce.com or SugarCRM?

Established software vendors with successful applications are receiving pressure to offer a cloud version of their software. The challenge that these larger ISVs face is that in order to have a successful, enterprise-class application, they must write the code from scratch internally. Developing such an environment is costly and can take years to have the reliability and usability that businesses demand.

Smaller ISVs are attracted to SaaS vendor ecosystems because doing so allows them to quickly deploy new software. These companies don’t get bogged down by writing the basic code, which is provided to them as a PaaS.

Take a look at Veeva Systems, a software vendor that has developed a cloud-based CRM solution for the pharmaceutical, animal health, and biotechnology industries. Veeva built its software in the Salesforce.com ecosystem. Without Salesforce.com, Veeva would have had to create a completely new platform from scratch — a monumental and expensive endeavor for a small company. Salesforce.com cannot meet the unique needs of every industry, so where Salesforce.com falls short, partners like Veeva step in.

For example, pharmaceutical companies must comply with specific regulations. Veeva has built-in functionality to track and report the required information. Because updates are done by Veeva, when reporting requirements change, it updates the application so all its users have access to the most up-to-date offering and are in compliance with industry practices and government regulations.

The ecosystem relies on the hybrid cloud for success. All the applications in an ecosystem were developed on a PaaS. The vendors creating these programs often run them on IaaS. Additionally, companies often want to back up all the data on their data center. End users simply access the SaaS, and don’t realize that behind the scenes multiple public and private cloud environments are being utilized.

Developing in a SaaS vendor’s ecosystem

Clearly, there are great benefits for ISVs that build applications in an established environment, but these independent development companies may be at the mercy of the SaaS vendor. If the SaaS vendor does an update, the ISV might find that its application no longer functions in the correct way.

Independent vendors need to make sure they can thoroughly test their software before upgrades. Also, the SaaS vendor may come out with a new feature that renders your application useless to most customers. For example, a company selling a Microsoft Outlook integration tool for Salesforce.com would quickly lose customers if Salesforce.com added built-in integration. Although these issues require ISVs to research a SaaS vendor before developing on its platform, in practice the relationship between the SaaS vendors and their ISV partners is symbiotic — each needs the other for success and growth.