App Integration Underpins Customer Engagement
CRM tools won't improve customer engagement if they are not integrated with legacy systems like ERP. Fortunately, application integration is far easier than it used to be.
Within the next five years, CIOs will have to deal with thousands of cloud applications and millions of mobile devices and sensors. And – shudder -- they will have to integrate everything.
Andrew Leigh, a product vice president at Jitterbit, a cloud-based data and application integration software vendor, explained the need for integration. "It's about engaging customers, unlocking your data and amplifying the value of your applications," he said.
History of Application Integration
To understand what's going on, let's go back 10 years or so to a time when every big enterprise owned a large ERP application like SAP that it ran on-premise.
But many organizations began to realize that having a single data silo wasn't the best solution, and they began to purchase their CRM software from a vendor other than their ERP vendor, said Stefan Ried, a principal analyst at Forrester Research. That meant running some combination of applications like SAP and Siebel, and using some form of middleware to integrate the two so they could share data. Each new application meant more middleware, months of waiting for the integration to be performed, and hundreds of thousands or even millions of dollars in software license costs and integrators' fees.
Cloud's Integration Ease
The cloud and the arrival of software-as-a-service (SaaS) changed this routine. Thanks to the speed and ease with which SaaS applications can be brought online, large enterprises now use an average of between five and nine enterprise SaaS apps, according to Forrester.
"Now there is the challenge of integrating cloud apps with other cloud apps, like Workday with Salesforce.com, and with on-premise apps," said Ried. "So there is cloud-to-cloud and cloud-to-on-premise, in every combination."
The good news is that integrating cloud apps is not nearly as hard as integrating on-premise applications, because they have been designed with exposed APIs for integration. "In the cloud you can integrate one app to another, and you don't need to install anything. The effort is far less than it used to be, and that is very, very important," Ried said.
The only real effort involves updating the metadata information about customer records, business records or other similar information to all the integration tools you are using, each time a field is added to a record. But that's about it.
App Integration and Customer Engagement
Jitterbit's Andrew Leigh said many of his company's clients are integrating their older on-premise systems like ERP, which are categorized as systems of record, with systems of engagement. Such systems allow customers -- over the Internet, often using a mobile device -- to access data that often is contained in systems of record. Examples of this include a Web page that can check on the status of your order at on online store, or an app that lets you choose your airline seat or see where your parcel is and when it is due for delivery.
Systems of engagement are typically found in the cloud, Ried said. "If you try and add systems of engagement functionality to your old systems of record, you'll probably find that it can't be done because they are not flexible enough to accommodate that."
Growing interest in such systems, which help enterprises derive more value from their data and more functionality (and thus value) from legacy apps, is driving the growth in integration requirements.
Costs of Application Integration
Because cloud integration is not a costly exercise and the business benefits are potentially very big, Leigh said Jitterbit customers often achieve ROI in less than eight months.
As an example of the costs of integration, Jitterbit charges $500 per application endpoint per month. So integrating SAP to Salesforce costs $1,000 per month, or $12,000 per year. "That's very different from the old-fashioned middleware approach that cost so much that ROI was more like three to five years," Leigh said.
Jitterbit client Virgin Australia has set up a system to handle customer mileage awards. The mileage transaction system connects to a data warehouse, then to six different databases to collect more customer information, then to Salesforce.com for even more customer information and to other applications in the cloud. Virgin integrates 20 endpoints to offer customers the service, and this costs the company just $60,000 per year, Leigh said.
Skull Candy, a Utah-based provider of headphones, earphones and other audio products, initially hooked its SAP on-premise system to an online ecommerce system to connect order capture and management from the Web to SAP. After the initial integration, the company saw that it made business sense to carry out further integrations -- for example, to help it carry out warranty management.
"Skull Candy now builds a new integration about every two weeks," Leigh said. "They are never going to be done. They will always want to build new integrations to engage customers."
Leigh said it makes sense to think about integration as connecting business processes rather than connecting applications to back-end systems.
"Everyone has mapped out their processes, and each process involves maybe 20 apps. What's been holding everyone back is connecting these applications," he said.
The implication of all this is that businesses will continue to offer their customers new and innovative ways of engaging with their data and their systems. To do so, they will have to integrate an increasing number of combinations of cloud applications and legacy on-premise systems. Fortunately, it can be done quickly and inexpensively.
Paul Rubens has been covering enterprise technology for over 20 years. In that time he has written for leading UK and international publications including The Economist, The Times, Financial Times, the BBC, Computing and ServerWatch.