Real-time access to data is a driving force behind enterprise modernization. It is, in part, why businesses are digitizing and adopting technology, as they look toward software solutions that can unlock information more quickly.
The race to digitize has introduced a new conundrum in corporate data management, however. With more on-premise and cloud-based solutions operating in the back office, enabling all these systems to communicate and share data with each other is not a given. Rather, companies are often forced to take on the responsibility of building out integrations.
With organizations surveyed by IDG estimating that they spent an average of $3.5 million each on cloud-based apps last year, and businesses in tech-heavy industries like manufacturing pushing to become entirely cloud-based, managing and deploying these integrations has evolved into a mountainous task. At the same time, new research has suggested that these integrations are imperative, particularly as they relate to the way companies are doing business with their partners and suppliers.
Cloud integration company Cleo published a survey this month that analyzed how IT executives are managing this challenge, and the implications of failing to address the cross-platform integration gap. According to the research, businesses miss out on half a million dollars every year, often in the form of lost sales, because their platforms are struggling to communicate with partners and between each other.
Cleo Chief Technology Officer John Thielens told PYMNTS in a recent interview that electronic data interchange (EDI) remains among the most popular mechanisms for companies to transmit information. Yet, the technology has remained largely unchanged in the decades since it first launched, and even brief unreliability can cause a company to lose out.
Thielens offered the example of transportation and logistics providers missing out on a bidding opportunity when loads are tendered automatically. Cleo customers have also pointed to the challenge of trying to work with a new business partner or customer that wants something beyond an EDI to do business — whether it be an API integration or a web portal. Businesses unable to provide that customer onboarding and interaction experience are being forced to turn those customers away, he explained.
“It’s like money pouring out of a broken pipe on the floor,” Thielens said of these missed revenue opportunities.
Cleo’s recent report, the “2019 State of Ecosystem and Application Integration,” found that organizations are feeling overwhelmed. Not only are they pushing to modernize and adopt cutting-edge solutions, but they’re struggling to ensure that all these new tools can integrate with each other. While some solution providers are building integrations with other third-party platforms for their corporate clients, Cleo analysis has suggested that businesses largely feel the weight of facilitating these integrations themselves.
The API Opportunity
Data integration is key for any area of the enterprise, but data sharing between financial platforms is now one of the biggest focuses for enterprises and their financial service providers, particularly as open banking trends begin to simmer in the U.S.
Thielens said payments is a particularly interesting area, considering how much innovation has occurred in the last decade with payers (consumer and corporate alike), demanding greater choice and variety in how they make payments. Companies must not only integrate solutions that can connect to their customers’ operations (for instance, a B2B supplier could gain a competitive edge if they were able to automatically provide a customer with remittance data following payment), but work to ensure financial technologies are interconnected. Accounts receivable, accounts payable, ERP systems and accounting platforms all exist in the same flow of financial data, and blockages to that flow mean limited visibility and the possibility for error.
While APIs are a promising technology to facilitate that integration, Thielens said the problem is that, today, a lack of standardization hasn’t made it much easier for organizations to move away from EDI toward an API ecosystem.
“Unlike EDI, which is old and stodgy (but standardized), APIs are a complete mess,” he said. “There is a huge collection of point-to-point integrations.”
While open banking isn’t a regulatory reality in the U.S., the financial services industry has taken on the issue of a lack of API standardization. NACHA is in the midst of collaborating on an API standardization effort, for example.
“It can’t be every man for himself,” added Thielens, who said groups must collaborate to come to an agreement on which APIs to use for particular tools and use cases. That’s not likely to happen anytime soon, he said.
Instead, businesses are beginning to take it upon themselves to figure out how to facilitate integration, with Cleo analysis pointing to the role of IT in addressing the biggest pain points, including new business onboarding friction. The majority of IT professionals surveyed said they feel they will be able to add value to their firms if they can support this end-to-end connectivity.
Today, said Thielens, IT decision-makers aren’t just a cost center for organizations to spend money on technology. Rather, they have a seat at the executive table, and are beginning to play a strategic role as a partner. As IT continues to tackle the data integration conundrum, it may one day evolve into a profit center, with the potential to bring that half-a-million dollars back to companies’ bottom lines.