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Integration Platform as a Service (iPaaS) refers to the integration of applications and data from the cloud and on-premises environments. With iPaaS, processes can be developed between applications without the expense of an integration platform.
What exactly is iPaaS and how does it work? What are the advantages and disadvantages of iPaaS? What types of iPaaS providers are there? And most importantly, how do you find the right iPaaS solution for your business? Learn all about iPaaS here.
iPaaS stands for Integration Platform as a Service. With this cloud solution, companies can network data, applications, processes and systems cleanly, uniformly and clearly. IT and business processes can be seamlessly connected and operated without interruption to the business.
One aspect of iPaaS that is often touted by users is that it simplifies integration work and makes it more accessible. Employees who want to perform integration tasks require little or no programming knowledge. The new role for these tasks can even be a Citizen Integrator (data expert within the business who may need to integrate data for their main job as data analyst, data scientist, etc.).
iPaaS is a coordinated collection of cloud services that ensures that data, applications, services and processes work together in a largely automated manner, both within a company and between organizations.
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One of the effects of the Internet, cloud computing, and increasingly complex business processes is that data, applications and services are virtually exploding. Another is that today's applications become obsolete much faster and are changed more often. It is not uncommon for existing software to be temporarily operated alongside new software.
This has led to more and more data being stored in distributed systems. When data is stored in different systems and different formats and cannot be exchanged, data silos are created. This makes smooth collaboration difficult – within departments, between departments and between companies.
Many companies have existing applications that are directly integrated with other software. These point-to-point connections between applications have become even more common with digitalization.
Over time, a “spaghetti architecture” develops. This not only makes further integration work very costly, it also makes it much more difficult to find and eliminate faults, especially when employees who did the original integration work leave the company.
The result is a large number of scattered data sets, which makes collaboration between and within companies and its departments difficult, but also toward customers and business partners. Traditionally, attempts have been made to meet such challenges through integration approaches such as Extract, Transform, Load (ETL), Hub-to-Spoke Integration or Enterprise Service Bus (ESB). These integration methods still play a role today. However, since they are typically rooted in an on-premises world, they provide limited support for today’s need for cloud connectivity and integration of cloud applications, though this is improving with newer versions. This is where iPaaS comes in.
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With iPaaS, a provider offers services on an integration platform in the public or private cloud. The platform is a complete IT infrastructure, including solutions and tools for integration work, available online. The provider is also responsible for maintenance, updates, upgrades, security, scalability and reliability of the platform.
Companies using iPaaS can concentrate on their core business, as they only have to worry about developing business processes, mappings and configurations. Everything else is delegated to the platform provider. In addition, iPaaS enables these companies to connect virtually any third-party applications, services, and databases to their ERP or CRM systems.
Another way to integrate the ERP or CRM system is through a comprehensive capability framework, called a Hybrid Integration Platform (HIP). An example use case for a HIP is a multinational company with branches, subsidiaries and an ecosystem of customers, suppliers and other stakeholders. In most cases, however, iPaaS forms an integral - if not the central - component of the HIP.
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There are many iPaaS providers in the market today delivering different services to different types and sizes of companies.
Some iPaaS providers attempt to address the broadest possible customer spectrum with their services. The possible use cases are aimed at small companies and start-ups as well as large international companies. These iPaaS providers are often large and well-known IT service providers.
Others are service providers that specialize in niche needs – also known as domain-specific iPaaS. Many domain-specific iPaaS providers are small businesses or start-ups. An example of a domain-specific iPaaS use case would be the reporting of internationally traded goods, which must comply with national legal requirements, to national customs authorities (e.g. the EDI Service for SAP GTS). In practice, however, the boundaries are often blurred and many iPaaS service providers attempt to cover more than one spectrum.
Another category of iPaaS vendors is larger midsize companies that have a background in iPaaS-related services – such as on-premises systems integration or B2B integration. In the past, some of these companies have included both enterprise and domain-specific iPaaS solutions in their service portfolios. They are continuously expanding their range and depth of services.
The number of active iPaaS providers worldwide is now in the low hundreds, and will continue to grow.
Enterprise iPaaS providers attempt to serve a broad range of integration scenarios through their solutions, with a focus on several target groups of business users, from the Citizen Integrator to the experienced IT professional to domain-specific iPaaS users. Large international IT organizations and medium-sized IT companies share this large iPaaS market segment.
Large iPaaS providers often do well on tasks with high horizontal complexity - i.e. the merging of many similar integration points. Services of midsize iPaaS providers are tailored more individually for this purpose, while at the same time offering a high level of resources and integration services. As the level of difficulty increases, consulting services play a significant role in both groups.
The most important target group of enterprise iPaaS vendors at the organizational level are companies and other institutions that have extensive integration requirements. Such organizations are increasingly adopting Platform as a Service (PaaS) and Infrastructure as a Service (IaaS) services in addition to SaaS. To do so, they often operate complex local IT landscapes and are dependent on high-quality B2B services. Here, end-to-end business process automation is particularly important. iPaaS works well with this type of automation.
Domain-specific iPaaS service providers represent another category. Corresponding iPaaS services can be made available by a small specialized service provider or a large iPaaS provider within a broad service portfolio. Examples include integration solutions for communication with customs authorities (Global Trade Solution) and Global E-Invoicing Solutions.
As the iPaaS market matures, specialized solution providers are likely to further expand their market share. As is typical in technology, the growth potential in niches and sub-niches will be tapped when the main market needs are increasingly saturated.
iPaaS in its current form is already more than a decade old. The emergence and development of this integration process is closely linked to the growth of cloud computing and SaaS.
When the first SaaS providers came on the market, their customers needed help integrating different cloud-based software solutions with each other and with their existing IT landscapes. The first iPaaS providers saw an opportunity there. They approached SaaS providers and offered them partnerships.
As a result, iPaaS providers benefited by not having to acquire customers. The SaaS providers won by being able to reduce or even completely delegate the effort required for the integration projects. This created a win-win situation that served as a catalyst for the growth of both market participants.
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Due to increasing complexity in IT, and the need to decrease total cost of ownership (TCO), iPaaS approaches have further evolved. New areas have emerged: e.g. Cloud-to-Cloud or IoT-to-On-Premises. iPaaS-supported EDI has also been added. As a result, major software manufacturers such as SAP, Microsoft and Oracle began to expand their SaaS services more aggressively.
After working with iPaaS vendors for a time, these manufacturers either bought those vendors out or developed their own iPaaS solutions. At the heart of this was that the major software providers wanted to closely link their own cloud solutions with their on-premises solutions.
Large providers have another advantage: they can scale via their partners or their own huge customer base. However, the integration of third-party systems remains problematic with these approaches. This is why numerous other iPaaS providers have emerged in recent years with a focus on niche requirements. The domain-specific iPaaS providers mentioned above fall into this category. This all equates to a highly competitive market.
If a market has growth potential, some large providers will try to secure the lion's share and smaller providers occupy the niches. Smaller iPaaS providers have very specific knowledge - often limited to one domain or even a sub-domain. Other providers position themselves somewhere in between.
With the continued growth of SaaS and other cloud services, the market for integration services remains attractive, leading many providers to this market to get a piece of the pie. This could eventually lead to oversupply, after which the trend should reverse until a balance is reached.
It is therefore likely that many iPaaS vendors - especially smaller ones - will be bought, change their focus, or go out of business. This is critical information when choosing an integration partner: strategic uncertainty and the potential cost of having to change vendors should be considered during the selection process. Also, mappings, workflows, and configurations set up with one iPaaS provider often cannot be easily transferred to another.
Companies should therefore think through these questions thoroughly before choosing an iPaaS partner. Chapter 10, which deals with selecting the right iPaaS solution, takes a closer look at this topic.
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The strength of iPaaS lies in its ability to combine a variety of data, applications, and processes in almost any combination and to integrate them across different operating environments. The most important operating environments or integration domains are:
The achievable cost savings, high flexibility, and easy implementation and handling have made SaaS solutions particularly popular. And because the barriers to entry are low, this SaaS market segment continues to grow faster than others, and will likely continue to account for the largest share in the future.
The term “on-premises-to-cloud” might trigger images of "dusty" old or legacy systems that are still in use in companies and are being connected to newer cloud solutions. However, the sale of on-premises software still accounts for a significant share of the software market.
While it is true that SaaS is growing rapidly, new on-premises software will continue to play an important role in the years to come. One of the reasons for this is that on-premises operation continues to appear attractive for highly individualized applications and software systems. An important advantage of iPaaS-supported on-premises-to-cloud integration is that by connecting to cloud software, the lifespan of legacy systems can be extended by widening their functionality.
With the on-premises-to-on-premises integration approach, all data and applications either remain within the enterprise behind the firewall or are hosted on a dedicated basis by the third-party vendor. Because on-premises software is still important - some of which will probably continue to run for years or even decades - integration is critical.
An example would be the synchronization of order data between sales, accounting and stock/shipping within a company. Some iPaaS providers also provide solutions for this that can be operated locally.
Integration scenarios at the application level are the main task of iPaaS. The primary objective here is to synchronize data between applications as quickly as possible; this supports or enables a business process or other activity. The data exchange process is often triggered by an event (e.g. a customer order) or by a regular process (e.g. daily data synchronization).
Another special feature of iPaaS-supported application integration is that data is mostly exchanged via modern Web APIs. APIs, however, are usually configured to serve only a limited number of calls. This must be taken into account, especially with large amounts of data and frequent requests. Otherwise, the integration points can become error-prone. These challenges can be mastered with iPaaS.
Application integration is also of paramount importance because today's applications must work together more and more with other applications and services. For example, data moves between applications every time companies add a new employee, partner or customer. As another example, SAP S/4HANA users can connect to external business partners using APIs, for example to transfer orders, invoices, etc.
In addition, applications not only work with different data formats, but also with other business logic. Well-planned and -implemented integration processes ensure that all operations run smoothly and support business objectives in the best possible way.
Processes ensure that data and applications work together to efficiently achieve a company's business objectives. Here iPaaS is well suited as a control center. Mappings, configurations and workflows can be developed; they route the right data in the right formats at the right times between the relevant applications.
In other cases, processes to be integrated are already prefabricated and only need to be combined into a process chain. An online order consisting of several coordinated processes could serve as an example.
Process integration is also important in larger cross-company contexts: it extends from the end customer to the first supplier or service provider in the value chain. If processes are not sufficiently coordinated, business objectives are sabotaged - even if individual applications and processes function correctly. With the help of the tools and services that online integration platforms have available, individual processes can be combined to form coherent and efficiency-enhancing process chains.
B2B process integration also plays an important role here. Specific data is automated and exchanged quickly and reliably with customers, suppliers and partners. One example of this is Electronic Data Interchange (EDI). This allows, among other things, invoices, delivery bills or orders to be exchanged automatically between companies.
Unlike traditional EDI approaches, data can be transferred via iPaaS not only asynchronously in batch mode, but also near real-time, through API integration. Furthermore, the time guaranteed in the Service Level Agreements (SLAs) for setting up these connections is often reduced from days to a few hours, minutes or even seconds.
iPaaS is a newer integration method. Older, traditional integration methods are still being used today.
With point-to-point integration between applications, each application communicates directly with the other. Young companies or established firms that want to take on new tasks or try out new fields of activity often use this method at first. As long as the number of corresponding applications remains manageable, this can be an acceptable solution.
However, as the number of integration points increases, you quickly lose track of the situation. As a result, effort and costs increase rapidly: The connectors to each new point-to-point-connected application usually have to be programmed individually. After updates or upgrades, complex adaptation, maintenance and testing work becomes necessary.
This is a major challenge for the in-house IT department. The advantages of iPaaS solutions that rely on cloud-based technologies, can be centrally managed, enable the use and management of modern Web APIs and offer many ready-made connectors are obvious here
Other well-known, on-premises-focused integration approaches are Extract, Transform, Load (ETL), Hub-to-Spoke Integration and Enterprise Service Bus (ESB). The difference between the ETL and ESB is fluid, but generally, ETL is more associated with the movement and processing of higher volumes of data, especially master data, and ESB with near real-time data processing.
In the Hub-to-Spoke model, the connections between apps and services are handled by a central broker — the hub. The spokes that connect the hub with the apps and services can be individually maintained. This allows the apps themselves to be more focused, with all arts of integrations handled via the hub and spokes. The main downside to this approach is the centralization of the hub, since it becomes a single point of failure for the system and for your infrastructure communications.
When using these approaches, applications are not integrated directly, but through an intermediate layer - making them similar to iPaaS solutions. Modern versions of these technology bundles are increasingly mastering SaaS integration and other cloud-based integration methods.
However, these integration approaches and models are primarily designed for on-premises integration scenarios. That's why they will always lag behind high-quality iPaaS solutions in delivering cloud connectivity and only support relatively simple SaaS scenarios. Their biggest disadvantage compared to cloud-based iPaaS is the low scalability.
It should be noted, however, that ETL / Hub-to-Spoke integration / ESB and iPaaS do not have to be mutually exclusive in practice. Rather, they can operate together and alongside each other. Especially larger international companies with diverse integration needs can benefit from the use of both methods.
Of course, iPaaS also has some disadvantages. They are not necessarily limited to iPaaS, but due to their scope, they should play an important role in choosing between it and other methods.
General shortcomings of iPaaS are the insufficient support of very specific functional requirements and the difficult search for a suitable provider.
Decent iPaaS solutions cover many integration scenarios today, and the number of supported use cases is constantly increasing. In practice, however, there will always be use cases for which the iPaaS market offers no solution. This may be because the required solution is technically too custom or is not (yet) economical from the perspective of the iPaaS providers.
Traditional integration methods such as ETL / Hub-to-Spoke integration / ESB or direct connections between applications can be more useful here. Nevertheless, it is worthwhile to research the available iPaaS solutions to find something suitable for your needs. In some situations, an iPaaS can be combined with existing local integration resources.
Citizen Integrators are often brought up in iPaaS discussions. Unfortunately, most Citizen Integrators can only handle a small number of integration tasks – usually those that are drag & drop and point & click. Relevant, advanced software or IT knowledge is often required for integration processes. Because business tasks are becoming more and more complex due to increasing market, compliance, and regulatory requirements, this will not change in the foreseeable future.
In addition, the majority of Citizen Integrators are busy solving the immediate and urgent problems of their departments. As a result, they can lose sight of the overall strategy, and over time, additional data islands form within the company. These isolated solutions consist of many makeshift, cobbled-together solutions and abandoned construction sites. When data islands form, a competent IT team is required to fix the situation.
One way to prevent this development is to provide professional support to Citizen Integrators from the very beginning. Integration tasks can be performed by internal IT departments, software specialists or by an iPaaS provider that offers the appropriate skilled personnel. In fact, many companies are rethinking the Citizen Integrator concept altogether, which is leading to an increased shift of budgets back into IT.
Another disadvantage of iPaaS is a large number of providers to choose from. They often differ in range of services and focus. Some try to cover as many use cases as possible, others pursue a domain-specific strategy.
In addition, on comparison portals and in the press, providers of traditional integration methods who have merely supplemented their solutions with SaaS connectivity are sometimes lumped together with full-fledged iPaaS providers. For newcomers to the subject, this adds to the confusion and makes it difficult to decide on the right iPaaS provider. The more you know about iPaaS, the easier finding the right provider will be.
The benefits of iPaaS can be summarized as follows:
A good iPaaS solution covers a majority of use cases in today's business world. In many cases, it can therefore form the core of a modern integration strategy and in a best-case scenario, meet most of a company's integration needs.
Nevertheless, many companies will not be able to put iPaaS at the center of their integration strategy overnight because of special integration needs and grown integration structures that require careful handling. For multiple reasons, the corporate world still relies on conventional integration technologies today. To abandon them prematurely would not be cost-effective.
For example, many larger organizations have in-house ETL / Hub-to-Spoke integration / ESB platforms and specially trained personnel. In other cases, the direct integration points between on-premises applications will continue to operate for some time because they are still performing their services reasonably well.
Even iPaaS solutions sometimes need to be supplemented, for example with a stand-alone API management platform. Or the necessary connectors for new or highly specialized SaaS applications are (still) missing. Here it becomes clear: the entire ecosystem must work cohesively.
iPaaS has an important role to play here as a building block, which must fit into the big picture in the long term, both technologically and strategically. The resulting ecosystem is sometimes a hybrid integration platform (HIP) approach. As digital transformation continues to take root, it is expected that the role of iPaaS within this extended ecosystem will grow significantly in the long term for many companies.
iPaaS becomes interesting as soon as SaaS solutions and other cloud services are introduced on a broad basis in the company. Another entry point is when there are many distributed systems on-premises, but the existing integration resources are outdated, unsatisfactory or insufficient.
It can be worthwhile to invest in an iPaaS solution right away to make the company's integration strategy future-proof. Many iPaaS vendors also have solution options that can be operated on-premises. Of course, the budget can also be split between traditional integration technologies and iPaaS as part of a hybrid investment strategy.
Background information on different categories of iPaaS vendors can be important for a sustainable decision. Some of them are highlighted below.
Large, well-known providers have a strong incentive to run Enterprise iPaaS as their main business. Because their size enables them to economically provide services of consistent quality in high volumes, they benefit from economies of scale. Although some providers include domain-specific iPaaS services in their service portfolios, these are expected to play a relatively minor role in their overall strategy.
Unlike the large iPaaS providers, many start-ups and young companies focus on one domain or even sub-domain for iPaaS services and tools. This gives them the chance to compete with the large market players in the long term. However, there is a risk that these iPaaS providers can be bought or taken over - even if they are successful. For example, if a large IT company decides to expand its service portfolio. This should be taken into account in the long-term planning of integration needs.
There is a third group of iPaaS providers, which includes larger, established medium-sized companies. They have often been active in the market for decades and have a background in iPaaS-related services. They benefit from their experience with related integration technologies and processes. These vendors can be considered for both enterprise iPaaS and specific iPaaS needs. In many cases, the consulting services they offer are more mature than those offered by start-ups and more individualized than those offered by large corporations.
The complexity of the corporate strategy will have a major influence on the integration strategy. Basically, the greater the bandwidth of the various SaaS services and the more customers, suppliers, companies, partners, or services that need to be connected from outside, the more iPaaS may be the right solution.
In this context, the number of different applications, protocols, and data formats that have to be converted and integrated is increasing. An example of such a use case is a multinational corporation consisting of many individual companies that need to be connected to each other as well as to the parent company.
Another example is the classic supply chain, in retail, and even more so in the automotive industry, often across national borders and consisting of several levels. Such a supply chain usually involves several hundred to several thousand suppliers. The supply chain is controlled by the intensive exchange of electronic messages between the business partners involved, all of whom must be integrated into the digital ecosystem.
Today, every large company already has extensive existing integration solutions that cover their most important integration needs. Most of these solutions are based on in-house integration platforms, which are usually operated by the company on-premises.
For these companies, there is a favorable entry opportunity into the iPaaS world as soon as a gap opens up between the existing integration solutions and actual demand. Even if only complementary needs arise, this is a good opportunity to gain experience with iPaaS and to create comparative values to existing solutions.
For many SMEs, however, direct links between applications still predominate. When the organization starts to spend as much or more time on the integration and management of data and processes than on the core business, there is an urgent need for action. Also, if SaaS or B2B data exchange plays a significant role, then an in-depth study of online integration platforms is appropriate.
The knowledge and qualifications of users play an important role in the choice of integration strategy. If it is a simple use case - for example, a SaaS software for travel expense accounting is to be integrated into an HR module - the majority of tasks can be performed by Citizen Integrators.
However, it often makes sense for Citizen Integrators to be supported by experienced IT specialists. In the long term, this can ensure fewer data islands and better data security, as well as protecting against conflicts with data protection laws.
Complex use cases, however, usually require a team of experienced software developers. Examples are highly individualized use cases or integration scenarios that involve high data volumes or are to be implemented in highly regulated environments - e.g. in the financial industry or the healthcare sector. In these circumstances, consulting services offered by a potential iPaaS partner can also be an option.
In every company, the integration requirements will change over time. One of the drivers of this is ongoing digitalization, which will affect every industry and every company at some point.
Some industries are more innovation-driven and more subject to change than others. At the company level, major changes in business strategy - such as new products and services or M&A activities can alter integration requirements.
These possibilities must be taken into account from the very beginning when choosing an iPaaS provider. It is important to identify the provider whose overall package offers the greatest flexibility and future viability and provides appropriate investment protection for their customers. If your choice of providers turns out to be wrong over time, the subsequent search and change can be costly.
Before you choose an iPaaS solution, getting answers to the following questions will help you narrow your search:
Now you are armed with information on iPaaS – what it is, how it works, what scenarios make the most sense for an iPaaS solution, and some details about the market. With this information, you can start to search providers and decide if an iPaaS solution is right for your company. It is a good idea to do a proof of concept (POC) with your chosen provider, to ensure that what you want to accomplish with your iPaaS now and into the future is possible with their offering. Contact us to discuss your needs, using the form below.
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