Note: You can check our ROI calculator to have a realistic measure of how much building integrations in-house is costing you as well as gauge the actual business/monetary impact of unified APIs. You can also download the calculator for future reference, here
Building a SaaS business without integrations is out of question in today’s day and age. However, the point that needs your focus today is how you are planning to implement integrations for your business. Certainly, one way to go is to build and manage all your integrations in-house. Alternatively, you could outsource the entire heavy lifting and simply adopt a unified API which allows you to integrate with all SaaS applications from a specific vertical with a single API key.
Of course, each one has its pros and cons (we have discussed this in detail in our article Build vs Buy) , but when it comes to calculating the ROI or the return on investment, a unified API takes the lead.
In this article, we will discuss how adopting a unified API can exponentially benefit your bottom line compared to the investment you make along with research backed data and statistics.
I) Saved engineering hours and cost
Let’s start with the first and most prominent area of cost and return on investment for integrations, engineering or IT labor hours.
Generally, building an integration requires normalization of APIs and data models from each SaaS application that you seek to use. Invariably, each integration requires the expertise of a developer, a product manager and a quality assurance engineer, in varying capacities. Each integration can take anywhere between a few weeks to a few months to complete.
So, if you build an integration in house, it can cost you around 10-15k USD. Now, consider if you are using 5 integrations for a specific category of software e.g. building HRIS integrations. It can cost you as much as 50-75k USD. At the same time, you will also spend many engineering hours not only building the integrations but also managing them indefinitely. And, this is only for one integration vertical. If you decide to expand your integration catalog to other categories such as ATS, CRM, accounting, etc, the number is much higher.
On the contrary, if you go for a unified API, your engineering team has to focus its energy and resources only on one API, which comes at a fraction of the cost and engineering hours.
II) Reduced time to market
Time to market, first mover advantage and market penetration are three areas that directly impact competitive advantage for any SaaS company. 57% of companies state that gaining a competitive advantage is one of the top 3 priorities in their industry.
The ROI of a unified API can be easily expanded to gaining this competitive advantage as well. A direct by-product of saving engineering hours with a unified API is that you can get started with integrations from day one and don’t have to wait for weeks or months for the integrations to be built. Moreover, you can deploy your valuable engineering resources on improving your core product instead of spending it on integration development and maintenance.
At a time when 53% of CEO’s are concerned about competition from disruptive businesses; reduced time to market with a unified API, gives businesses the first mover advantage and addresses their concerns of being replaced by competition.
III) Improved scalability rate
The next return on investment parameter that you need to consider for making a case for unified APIs is how fast you are able to scale.
It is not about adding only one integration to improve customer satisfaction. Rather, you need to scale your integrations one after the other, faster than your competitors.
Now, if you build integrations in-house, chances are you will take at least a few weeks for each integration, making scalability a challenge.
Contrarily, with a unified API, you are able to scale faster as it enables you to seamlessly add more integrations with a single API. You don’t need to spend time and resources on normalizing data from each application that needs to be integrated.
When you scale quickly, you are able to meet the increasing and dynamic customer demand, resulting in more closed deals in less time.
Also Read: State of SaaS Integration Report 2023
IV) Higher customer retention rate
Customer retention is a key growth metric for any SaaS business.
Research shows that a 5% increase in customer retention results in 25 – 29% increase in revenue. Furthermore, retaining existing customers has been shown to increase profitability by 25% to as much as 95%. Together, these data points clearly depict how customer retention impacts your bottom line.
From an API and integration lens, chances are that your existing customers will gradually demand for new integrations during the course of your association. In case you deny them the integrations due to lack of engineering resources, or divert your IT hours towards building them in-house (which can take weeks!) — chances are that your customers will move to your competitor.
However, providing those integrations is the only way to retain your customers. Invariably, if you want to facilitate customer retention without too much capital investment, unified APIs are the way to go. They enable you to quickly add integrations to your product, without heavy upfront costs and the customers who you are able to retain have the potential to add significant revenue to your bottom line.
V) New monetization opportunities
Interestingly, you can use integrations not only to support your product but can also monetize them depending on how you are able to integrate them with your solution. Based on the integration, you can define specific use cases for businesses which can help them understand how their integrations can make an impact for them beyond just data exchange. For instance, you might be able to create revenue opportunities by enabling your customers to leverage API data to redefine their business models.
However, this monetization is only possible when you can scale fast and are able to add integrations as well as customize them for your customers. If you are building integrations in-house, this speed and customization may not be possible. However, a great ROI for unified APIs is ensuring that the cost of procuring the unified API is significantly surpassed with the new revenue it brings to the table.
VI) Big deal closure
Enterprise customers who generally offer big deals believe in the power of integration and wish to stay away from data silos. These companies want your product to come with specific integrations that can help them integrate all data from different applications. At the same time, these companies don’t want to wait too long to get their hands on your product.
If they have to wait for weeks to start using your product because you are delayed in building integrations in-house, chances are they will sign up with your competitor.
Therefore, a high ROI way of closing big deals is to go with a unified API over in-house integrations, providing a seamless sales experience.
VII) Access to missed opportunities
Research shows that 46% of sales inquiries are missed opportunities. While there may be different reasons for missed opportunities for different industries, a big reason for many SaaS platforms is the inability to provide integrations prospects are asking for.
Chances are high that your sales team is struggling hard because your platform lacks integrations or because the time to market is too slow. This will lead to missed sales opportunities with your potential customers going to your competitors.
However, with a unified API, you can add integrations based on customer needs, without having to navigate the waiting period that comes along with in-house integration building. Therefore, the speed of execution that comes with a unified API ensures that you are able to capture and convert all sales opportunities that come your way.
This is a direct return on investment, with a potential to increase your conversion rate by almost 50%.
VIII) Better security
Since integrations are all about data exchange and management, security is often a key area of concern. This suggests that your security posture from an integration standpoint can make or break your business.
Research shows that 91% of organizations had an API security incident in 2020.
From a security lens, encryption, classification, monitoring and logging play a major role in integration.
However, taking care of it all in-house during building and maintenance can be tricky and cost intensive. Every time there is a security concern, your in-house team will be required to take care of all troubleshooting as well as responding to your end customers.
Fortunately, these security concerns are taken care of by the unified API provider and the onus doesn’t lie with your engineering team. Security occurrences are also accompanied with downtime costs, which can be resolved faster by third party providers.
Thus, if you look at the return on investment from a security standpoint, a unified API will help you significantly reduce the costs from security incidents. Even if these incidents happen, all efforts to remedy the same are taken care of by the unified API provider, making security management seamless for you.
IX) CTO sentiment
When measuring your return on investment or costs associated with integrations, you need to also take into account the soft costs. Here, catering to the CTO sentiment is extremely important.
- On one hand, building integrations in-house puts the pressure on your CTO to hire more resources with specific skills, which is complicated, and an added IT expense. Research shows that 67% of the digital leaders are struggling with a skills shortage.
- On the other hand, even when there are enough resources, CTOs struggle with allocating bandwidth to anything other than their core product feature or enhancement. Invariably, diverting attention to building integrations in-house has repercussions on the core product, delaying release.
Together, these factors lead to CTO frustration and resentment.
However, with a unified API, the CTO can focus all their engineering resources on the core project at hand, ensuring quality delivery in a timely manner.
This CTO motivation along with enhanced product delivery is another way how a unified API surpasses in-house integration building from an ROI perspective.
X) Improved customer digital experiences
Customer experiences are a core tenet guiding return on investment for businesses.
86% of buyers are willing to pay more for a great customer experience. This suggests that if you are able to create a great customer experience with integrations, you can secure more revenue. There are several reasons why a unified API can help you in creating exemplary customer experiences.
First, unified APIs give a native experience to customers and are built by experts. When building integrations in-house, chances are that you may or may not be able to achieve the right mark. Second, many unified APIs come in the form of a white label solution to which you can add your own branding seamlessly.
If your customers have a great experience, chances are high that they are willing to pay a premium for this experience, leading to a clear ROI for your business with a unified API.
How to compare the ROI for unified API vs in-house integrations
If you are deciding between the build vs buy approach for customer-facing integrations, consider the following ROI metrics for both the scenarios:
1. Total cost of integrations
For a unified API, consider the cost of procurement and one time installment. Whereas for in-house integrations, calculate the capital investment and engineering cost. Here, you will get a clear picture of where the cost is higher from a short term and a long term view.
2. Current market landscape
Second, for your ROI, you need to understand how quickly you wish to move. If there are no competitors for you, you can take time to build integrations in-house. However, if there are others already capturing the market, you need to move fast. Therefore, consider your time to market.
3. Number of integrations
Next, from an ROI perspective, check how many integrations you need to have. If there are only a couple of them, you can consider building them in-house. But as the number of integrations increase, building in-house will become more expensive with declining return.
4. Resource bandwidth
Finally, you need to understand how diverting resources to integrations will impact your product lifecycle. If this leads to product release delays, impacting your core revenue, building integrations in-house can be very costly, surpassing the ROI.
Final Thoughts
Overall, it is quite evident that you can achieve a higher ROI if you go the unified API route, especially if you want to scale fast. At the end, you should simply weigh the costs associated with each in terms of set up, maintenance, security and the new revenue they bring along with customer retention, experience, monetization, scalability, etc.
Knit unified API helps you to integrate multiple HRIS, ATS and communication apps with a single API key for each category, reducing repetitive work. Knit also provides on-going integration management and support for your CX teams. Explore the suitability of our Knit API for your use case by signing up for free. Get API keys
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