The Evolution of SaaS Platforms: An Interview with Scott Brinker, VP at Hubspot
Scott Brinker is the VP of Platform Ecosystem at Hubspot, and the chair of the MarTech conference. He is well-known for his writings on marketing technology, and his annual mapping of the entire martech ecosystem.
Scott shared his insights on how SaaS integration is evolving, the difference between integration and workflow, and what companies should consider when trying to scale their in-app marketplace.
The average business is using hundreds of software. This has created a huge problem of efficiency as data must move amongst these systems.
Currently, there seems to be 3 distinct solutions to this problem. One, the business handles integrating the systems by buying an iPaaS or building custom integrations in-house. Two, the software company builds the integrations, either with an embedded iPaaS, by themselves, or by their tech partners. Three, the business turns to a third party, either a dev agency or another SaaS company, and pays them to build the integrations.
Do you agree with this assessment of the market, and how do you see this evolving in the next 5-10 years?
I like the way you framed it. It is an accurate model of the current environment. The first approach is the most common right now. The largest number of connections are running through an iPaaS product by business users.
The second solution is the most elegant. The platform and the developers who work on it can build software so that the end user doesn’t have to construct any plumbing. I think there is great momentum happening in this space.
The third approach I don’t see as often. There are system integrators, but I suspect that accounts for a smaller share of the market.
I think it’s shifting toward the second platform model, but there’s a long way to go. When it comes to mobile platforms, for example, you have Android and iOS controlling the market. That’s kind of the ideal. Developers can sensibly invest in learning one or both, and build on them. The experience for customers is seamless.
In marketing technology, on the other hand, you have at least six major public companies with platforms, and several dozen more companies on the rise. As a result, there is no common standard that developers can learn yet. It takes time to learn a platform, and there is a lot of variance right now in how easy they are to build on and how well they are designed.
So as a developer, you have to pick which ones to build on. Because developers need to learn multiple systems, it limits the ecosystem growth of any given application platform.
However, the reason why my faith is in the market moving toward number 2 is because it doesn’t seem like the business user should have to be worried about the integration logic. It really feels like something the SaaS companies should solve.
One thing that has fascinated me about martech is that in almost every other industry there was a platform, and then an explosion of growth blossomed around that platform. With martech, it was the opposite. There was an explosion of martech products first — and then companies coming in and trying to become platforms to create a center of gravity for that diffuse ecosystem of hundreds of technologies.
We hear a lot about no or low code tools these days, but there is often a trade-off with control, quality and flexibility. What is the status in the iPaaS space of these low or no code tools in terms of how much they can actually accomplish without coding?
There are two different levels to this. I would separate integration from workflow. If you’re going to have workflow across tools, you need integration. But once you have systems integrated, you still need to define those workflows.
As a business user, workflow is more detailed and particular, defining all the ways the user is interacting with their data and moving it through various systems.
Currently, iPaaS options conflate this distinction. For instance, Zapier can be used for both workflow automation and integration.
Where I believe no code solutions have a lot of value to offer is on the workflow piece. I want the integrations themselves to be predefined and configured once, but as the business user, I want to control the business workflow.
I think the real promise of no code is giving as much of the power over setting that business logic to the business user as possible.
Most people are using an iPaaS for integration, and it's workable. My opinion is that in a better world, the technical portions of the integrations would be much more seamless. As a business user, I don’t want to be thinking about mapping fields between different systems. Those types of preset configurations should be built into the UX of the integration in the first place.
As someone who oversees a robust platform ecosystem with hundreds of integrations, what advice would you give SaaS companies who are moving past having dozens of integrations in terms of creating an integration strategy and partnership program designed to effectively scale?
There are a number of companies doing this well. Salesforce is the canonical example. I am also incredibly impressed with Shopify. And Atlassian and Xero also run platform programs that are pretty savvy.
From the technical layer, one element is just opening up the APIs. Part of the problem is companies have all this data, and they have this built in the UI, but the percentage of their data that is externally accessible is relatively small. You need to open APIs if you want to be a platform.
I’ve talked before about four different layers of integration. Workflow and the user interface of integrations are important. If you want to be a platform, you really need to think about these elements as well, and not just the simple ability to move data from one system to another.
From a program level, you have to decide how open you are going to be. Part of the challenge in SaaS is that there is so much overlap. If you’re going to run an open platform, there will be a competitive and cooperative overlap. Co-opetition is the idea that we are friends on one dimension, yet we are also competing on another dimension. You want to be thoughtful about appreciating that nuance.
Another aspect you have to be careful about is how you approach monetization. If you are going to monetize off each transaction, it could be a net positive distribution channel. And partners are open to paying a percentage of sales if they are truly getting new customers. If they aren’t though, it starts to seem like a tax. For successful partnerships, you want to ensure that you are bringing more value to partners than you are extracting.
If you aren’t monetizing transactions, you have to find other ways to track how prospects or customers are converting to integration installs. This is trackable, and best practices are getting more rigorous in how this is done. But it’s a funnel that can have a lot of leakage.
Any time you’re moving data amongst systems you are creating additional security issues. Do you have any advice for SaaS companies building product integrations in terms of security best practices?
Yes, there are different layers. At the foundation layer, you have OAuth 2.0 — that is the baseline protocol for authorization for most apps.
Then there is the specification of the scopes. Access should be as specific as possible. Do not make access broad, where anyone with a key can access all the data or functions. Granularity in defining scopes gives you more control.
You also have to consider what visibility you have. You should build a way to audit and monitor where customer data is going.
As you’re increasing the number of third party users and third party applications touching your data, is there a trade-off between more integration and security?
Security shouldn’t have to be a Pareto trade-off. I want to control what data can be accessed, and who has it. We live in a world where we have hundreds of software apps. Even if we decided to pull back to fewer software apps in our stack, it would take us decades to untangle.
So given that we are in the world where we all have these large tech stacks, we have to move to a next level of security that we can layer on top.
I do believe the market is moving toward more secure data. Sadly, marketers haven’t always thought about security as much as they should have. But they do think about compliance much more now, as they know they can get in hot water over it with regulations such as GDPR and CCPA if they don’t.
Can we reduce the vulnerabilities by orders of magnitude? Absolutely. When evaluating SaaS companies, prospects should push vendors for control over data and to ensure that companies are creating and handling it securely. We are becoming more sophisticated users with SaaS, and that is helping make data more secure.
Any other thoughts on this market or advice for SaaS companies looking to build product integrations?
There have been a ton of surveys over the years. Two things are true. People love their specialized SaaS. The world is full of amazing apps and people love them. But this creates a pain point for users. If integrating systems isn’t at the very top of the list as a pain point for marketers, it is always in the top three.
So if I am an entrepreneur, this is a sign from heaven. The market is telling us what they want. If you can make integration better, there is a tremendous demand. And indeed, there is so much opportunity here to make it better. We have a ways to go, but it’s a challenge and an opportunity to make customers’ lives better.