Vertical integration in SaaS: should you build, buy or partner?

Vertical integration in SaaS is the process of consolidating all of your financial system capabilities into a single platform rather than relying on a sprawling patchwork of third-party solutions. Typically, vertical integration is achieved through an ERP like NetSuite by building out internal solutions, buying apps that extend its native capabilities or partnering with SaaS providers. 

But what are the advantages of vertical integration, and which path will deliver the best return on your investment? 

Let’s look at how to evaluate your financial tech stack to determine where vertical integration will benefit your business the most, and which approach will provide the ideal solution. 

Vertical integration vs. SaaS sprawl

A business’s ERP is the beating heart of its operations, but its out-of-the-box functionality is rarely enough to cover every need – let alone develop a competitive finance strategy. Complexities introduced by billing, revenue recognition, reporting and compliance challenges typically require additional systems and integrations to extend an ERP’s capabilities and move data smoothly across all departments. 

There are two main strategies companies can adopt to meet these challenges:

• Vertical integration is an ERP-centered approach that relies on building out internal systems or investing in native SuiteApps and solutions that reduce the number of vendors and integrations. 
• Third-party tools can be plugged into your ERP or financial systems to address each specific need. This strategy increases complexity, introduces unique data challenges with each system and contributes to SaaS sprawl.

The advantages of vertical integration

Vertical integration allows companies to gain critical functionality and streamline operations while taking full advantage of an ERP’s automation capabilities. NetSuite users, for instance, can invest in native SuiteApps that exist entirely within NetSuite and integrate seamlessly with existing workflows and tools. 

On the other hand, third-party tools may offer increased flexibility for businesses, but almost always require additional investments to integrate with your ERP. This can quickly complicate your financial strategy by requiring users to juggle additional logins, and integration gaps lead to manual workarounds that rapidly consume your team’s time and resources.

When picking a solution, businesses should consider the following:

• Operational efficiency. Does your strategy lead to managing one system or ten?
• Data integrity. Do you have one source of truth or many disconnected ones?
• Forecasting and financial planning. Can you see the whole picture in one place, or are you pivoting between systems and patching together numbers in Excel?
• Control vs. flexibility. Do you want tighter integration or a dedicated tool that provides maximum flexibility regardless of what that means for your team?

In most cases, third-party tools offer instant functionality but don’t future-proof your financial tech stack through increased automation and limitless scalability. And because these systems aren’t housed entirely within your ERP, you’ll always be subject to complications from updates, synchronization delays and increased risk for audits and compliance.

Implementing vertical integration

When businesses opt for vertical integration in SaaS, they have three options: build, buy or partner. But which one is right for your business? Each offers advantages that can be balanced against your company’s financial and practical needs. 

Build

In-house development is a great option for businesses that have available capital and niche insights that may deliver significant competitive advantages.

Pros:

• Tailored solution. A custom solution can be built to your exact specifications. 
•  Market precision. An in-house tool can be designed to take advantage of your core competencies and maximize your competitive opportunities. 

Cons:

• Expense. This is the most resource-intensive option for vertical integration.
• Time-consuming. Creating new software from scratch won’t solve your problems overnight – or any time soon.
• Support and maintenance. Once it’s live, you’ll be responsible for troubleshooting any issues that arise.
• Risk. New software is an unknown. It may not perform as intended, or worse, fail to provide the functionality you need.

Buy

NetSuite users enjoy a broad range of native SuiteApps that cover a wide range of business needs. 

Pros: 

• Cost-effective. While they require an up-front investment, it’s far less than developing a tool from scratch.
• Instant functionality. These tools are almost always plug-and-play.
• Certified Built for NetSuite (BFN). There’s no question it can be onboarded quickly and seamlessly with your existing systems.
• Control. Because these integrations are designed with NetSuite in mind, you’ll have maximum control of your data across all of your business functions. 

Cons:

• Not a 100% custom solution. While pre-built native SuiteApps deliver instant functionality and solid vertical integration, they may require slight compromises compared to a pure, custom solution.

Partner

SaaS partnerships offer unique benefits for businesses looking to enhance their customer experience or expand into new markets. However, these relationships require additional layers of evaluation and maintenance compared to building or buying a solution.

Pros:

• Limited customization. Partnerships make space for custom adjustments to SaaS tools within the scope of each partner’s business strategy. 
• Market reach. By working with a partner, your business can take advantage of their customer base and market insights. 

Cons:

• Lack of control. Because you are dependent on your partner, there are limits to how nimble and flexible you can be.
• Data security. When you partner for SaaS solutions, you’re never in complete control of your security and compliance.
• Performance issues. Updates, maintenance and data synchronization may not happen on a timeline that’s convenient for you, introducing risk and increasing manual work for your team.

Maximizing vertical integration with Zone & Co

NetSuite gives its users unprecedented opportunities to take advantage of vertical integration in SaaS, and Zone & Co’s portfolio of native SuiteApps is unlocking increased functionality while maximizing automation and control. 

Integrations like ZoneBilling, ZoneReporting and ZoneCapture deliver instant functionality for finance teams, accelerating your business while eliminating manual workarounds and costly errors. Whether it’s billing, revenue recognition, reporting, compliance or auditing, Zone’s native solutions for NetSuite deliver vertical integration that scales effortlessly with your boldest market strategy. 

‍Book a demo of Zone’s portfolio of native SuiteApps and find out how we can solve your finance challenges.