The challenge for most integration PaaS vendors is that their business is simply not profitable
Although the market for integration platform as a service (iPaaS) shows strong growth, the first signs of market consolidation are starting to emerge. Gartner predicts that by 2023, up to two-thirds of existing iPaaS vendors will merge, be acquired or exit the market.
“The challenge for most iPaaS vendors is that their business is simply not profitable,” said Bindi Bhullar, senior research director at Gartner. “Revenue growth and increasing customer acceptance can’t keep up with the costs for running the platform and the heavy spending in sales and marketing.”
Megavendors such as Oracle, Microsoft and IBM are better-equipped to handle those challenges as they offer more-competitive offerings with more-aggressive pricing and packaging options than smaller players in the market. Gartner expects that this trend will continue, further diminishing the market share of specialist iPaaS players.
“For organizations looking to purchase an iPaaS solution, this is good news,” said Bhullar. “They can capitalize on the evolving market dynamics by solving short-term/immediate problems today, while preparing to adopt another iPaaS offering from an alternative vendor as the expected market consolidation accelerates through 2023.”
However, market consolidation means an increased risk that platform services will be discontinued due to the vendor exiting the market or being acquired. “Buyers should minimize exposure to vendor risk by adopting platforms that can deliver short-term payoffs, so that the cost of any eventual replacement can be more easily justified,” Bhullar added.
