iPaaS: What this cloud technology is and why it’s important

iPaaS connects many clouds together and could be a $1 billion market soon

GameStop operates more than 4,000 stores in the U.S. and another 2,000 abroad. Between paying monthly rent, managing leases and searching for new properties, there’s a lot to keep track of for the company’s commercial real estate team.

A few years ago GameStop began using a real estate management software as a service (SaaS), but Vice President of Enterprise Architecture Mark Patton says there was a problem. The software needed data from many of GameStop’s other business apps: ERP systems, financial platforms, etc.

“We needed a way to glue these things together,” he says. “You need to be able to get data into and out of apps quickly.”

Traditionally, the answer to this problem has been to use integration software on premises. In recent years a market has emerged in the cloud called integration Platform as a Service, or iPaaS, which offers a hosted integration platform that can be a central cloud for connecting many apps and cloud services together. Gartner estimates it could be a $1 billion industry in a few years.

iPaaS, the cooler, hipper ETL

The emergence of iPaaS is the next-generation of traditional enterprise service bus or extract-transform-load (ETL) tools, says Massimo Pezzini, a Gartner analyst who tracks the iPaaS market. Broadly, iPaaS refers to a set of cloud-based applications and data integration tools delivered as a service.

The real value of iPaaS is in its functionality: Users can move data from one database to another, whether they’re cloud-based or on premises; they can download purchase orders from Salesforce.com and have them automatically uploaded into an SAP ERP system for record keeping.

“iPaaS allows you to automate business processes that span multiple on-premises and cloud-based resources,” Pezzini says. Because it is a cloud offering, it can connect to any number of data platforms. And because it's hosted by the vendor, end user customers like GameStop don’t have to dedicate infrastructure or staff on premises to run it.

Pezzini estimates that iPaaS revenue across all vendors will reach $420 million this year and will grow at a 55% clip to reach a $1 billion market within three years. Last June, IDC estimated that the worldwide data integration and access market (which includes ETL and iPaaS) would reach $5 billion, growing 8% annually.

Pros and cons of iPaaS

iPaaS isn’t a panacea. Traditional integration platforms excel in functionality, especially in their ability to integrate complex applications together. The downside is they typically require expert skills to configure and manage. For customers that need low-latency throughput of data between apps, traditional ETL tools can be essential. Pezzini estimates that 60% to 70% of integration issues aren’t that complicated and could run in a simplified iPaaS though.

Cloud-based iPaaS tools excel in ease of management, offering pre-built integration algorithms, GUI-based drag and drop customizable templates, or command line interface manipulation.

A sea of iPaaS vendors

Because iPaaS is an emerging area within the last two to three years, it's a crowded and unsettled market. In Pezzini’s latest Magic Quadrant report he identified five companies as “leaders” in iPaaS including Dell Boomi, Informatica, Mulesoft, Jitterbit and SnapLogic. Another dozen vendors made it into the Magic Quadrant, and another 20 have iPaaS offerings but didn’t qualify for the MQ.

Some popular enterprise app and SaaS vendors are trying to offer their own versions of iPaaS, which could be a headwind for the growth of these markets and could be an alternative to customers who do not want to buy a full-fledged iPaaS offering. Salesforce.com, SAP and Workday each have their own tools for importing and exporting data. But Patton, from GameStop, says he’d rather develop skills in a platform that can integrate myriad sources together, instead of being beholden to whatever integrations Salesforce develops for its SaaS.

Pezzini agrees that building broader skill sets in general integration is a better practice than developing an expertise in one app.

“Cloud is a best-of-breed playground,” Pezzini says, noting there are lots of small, extremely focused vendors who provide services in the field of marketing automation, talent management and various forms of support. Over time, these vendors will agree to support one another, but he says it’s a volatile market – one day they’re friends, another they’re enemies. “My view is the cloud environment will remain extremely fragmented, so there will always be a need for someone to play Switzerland, for some platform to integrate across these vendors.”

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