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What is integration? A comprehensive guide

Written by
Saad Merchant
Published on
April 4, 2024

According to a report called 2024 State of SaaS Integrations, 84% of businesses say integration is “very important” or a “key requirement” for their customers. As per the same report, 67% of companies invest in integration to improve close rates. So, what is an integration? It can mean many things, but in the context of digitally transforming businesses, it refers to the merging of disparate data, software, and technology. So how do businesses define integration? What are the benefits of integration? How has it evolved over the years? And what are the different integration methods? Read on to find out!

What is integration?

In business technology, integration is the process of combining different computing systems, software applications, and data sources to enable the seamless exchange of information, processes, and capabilities.

While there are several integration trends, apart from methods and mediums, the ideal way to define integration in a broader sense can be based on three different types of integration, namely:

  1. Data integration: This involves combining data from different sources into a unified format, providing a comprehensive view of all information assets. This also includes data migration.
  2. System integration: This entails linking together different IT systems, hardware, and software components within an organization to ensure smooth communication and interoperability.
  3. Application integration: This type of integration focuses on connecting disparate software applications, across on-premises or cloud environments, allowing them to work together seamlessly and share data in real-time.

The business benefits of integration  

Apart from helping businesses connect disparate systems and eliminate data silos, integrations today also help automate and streamline complex processes. What’s more, integration helps uncover valuable data insights, enabling informed strategic planning and business innovation. As such, integration entails several business benefits, such as:

  1. Enhanced efficiency: Integration reduces manual tasks and errors by automating data exchange and streamlining processes across various systems, leading to more efficient operations.
  2. Improved data accuracy: Integration ensures that data is synchronized across all systems, providing a single source of truth that enhances decision-making with accurate and consistent, real-time information.
  3. Cost optimization:Integration can significantly reduce operational costs by minimizing the need for manual intervention, lowering the risk of errors, and streamlining processes.
  4. Enhanced collaboration: Integrating systems across departments and teams promotes collaboration by providing all stakeholders with access to the same timely and accurate data, thereby improving communication and alignment on objectives.
  5. Business innovation: Integration enables businesses to leverage new technologies, such as the latest cloud apps, SaaS solutions, or even AI tools, by combining them with existing systems.

Most importantly, integrating the systems that various business departments might use can enable better data exchange and coordination between these different departments. For instance, a business might use an ERP system to manage internal operations and finance, the Sales Team might use a CRM system to manage customer data, and an e-commerce platform may be used to manage online sales. Integrating these systems will help the respective departments that manage these functions to work in a more interconnected way.

Read more about how integration can help enhance the Value Chain of enterprises →

How integration has evolved over the years

While integrations started as simple data exchanges between on-premises business systems in the late 1900s, often through manual processes or batch file transfers, modern businesses now create unified ecosystems of integrated data, SaaS (Software as a Service), and cloud applications (via APIs). Let’s briefly explore this rapid evolution that has come to define integration over the years:

1. The first generation of integration - EDI integration

In the 1970s, EDI (Electronic Data Interchange) emerged as one of the first types of system integration when organizations adopted computer systems for data processing. Enabling businesses to exchange data in a paperless and digitized standard format, EDI is still one of the most effective means to exchange B2B data, such as invoices, shipping details, and purchase orders.

2. The second generation of integration - ERP and CRM integration

In the 1990s, with the implementation of enterprise applications such as Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) systems in the business landscape, the need for system integrations became more complex. Enterprises started to consider connecting more applications, systems, and data in order to improve business operations and development.

3. Third-generation system integrations - Cloud integration & API integration

With the rise of cloud-based applications and services in the 2000s, industries started to digitalize rapidly as commerce moved online. To meet these challenges and digitalize their business processes, enterprises started to integrate various new cloud apps and SaaS solutions that emerged while also seeking to migrate legacy systems and data sources to the cloud.

It became easier to connect applications using APIs (Application Programming Interfaces), which are a set of protocols and standards that enable different software applications to communicate with each other. Developers could now build standardized interfaces to connect and integrate software faster using their APIs, which provided a simpler and more flexible way to exchange data in real-time.

Different integration methods: Point-to-point, ESB, and iPaaS

As integrations evolved over the years, so did the different types of integration methods. While integrations are traditionally created as point-to-point connections using custom code, this method worked so long as businesses needed to integrate any two applications. However, with the increasing need to connect more applications, building integrations with custom code starts to become more expensive, and accurate data exchange becomes harder to maintain.

This led businesses to implement middleware solutions or software solutions, such as ESB systems, designed to integrate multiple applications, on-premises systems, and data sources. However, the advent of cloud technology and API integration capabilities would drive businesses to advance further by implementing cloud-based, API-led integration platforms called iPaaS (integration Platform as a Service). Let’s explore these different integration methods!

The limitations of point-to-point integrations with custom code

Building point-to-point integrations with custom code presents several challenges as businesses scale. This means each connection between two applications is built separately, and so as the number of these direct connections increases and starts to form a complex maze of crisscrossing code, data silos, and processes, leading to an entangled IT ecosystem. As such, point-to-point integrations present limitations such as:

  • Scalability issues: As new systems are added, the number of direct connections increases exponentially, making the architecture complex and difficult to manage.
  • Resource-intensive maintenance: Custom code integrations can become challenging to maintain and update, and they can only be developed and governed by expensive senior developers.
  • Lack of flexibility: Point-to-point integrations are rigid. Adapting to new technologies or changing business processes can be cumbersome and slow.
  • Data silos: The lack of a centralized system for integration can lead to inconsistencies in data, making it difficult to achieve a single source of truth.

To address these shortcomings of point-to-point integrations, businesses started using various middleware solutions, such as Remote Procedure Call (RPC) middleware and Message-Oriented Middleware (MOM), to enable communication between multiple applications. However, a popular solution that emerged from these early middleware solutions was the ESB system.

ESB solutions as an early integration solution

ESB, or Enterprise Service Bus, is an integration architecture framework that enables businesses to connect multiple systems and applications from one central hub (or messaging bus). As an on-premises middleware solution it requires the installation of hardware. It functions as a centralized communication hub that standardizes the integration of legacy systems with various applications, services, and databases. Since ESB relies heavily on on-premises footprints, older messaging, and aging document standards, they are commonly used by enterprise businesses. ESB solutions require dedicated trained IT teams.

ESB solutions essentially introduced an integration architecture that helped companies standardize how they integrated legacy systems with various applications. However, the advent of cloud technologies and APIs would necessitate a next-gen integration solution. And that’s where the iPaaS comes in

The iPaaS: A next-gen integration solution

In recent years, the iPaaS (integration Platform as a Service) emerged as a next-gen, cloud-based middleware solution that leverages APIs to seamlessly integrate multiple SaaS, applications, systems, or data sources. Unlike point-to-point integrations or ESB solutions, the iPaaS helps create, monitor, and manage integrations from a user-friendly web interface without any custom code or need for on-premises hardware installation.

As such, iPaaS solutions are either no-code or low-code solutions. This means it enable both developers and business users (CTOs, project managers, junior developers) to orchestrate and govern integrations via simple drag-and-drop or click-and-configure integrations. This leads to several integration advantages:

  • Faster integrations: Enabling rapid deployment of integrations via APIs, many iPaaS offering a wide range of pre-built connectors that accelerate integration with popular software
  • Infinite scalability: Being cloud-based and API-led, the iPaaS makes it easy for businesses to add multiple new applications without significant upfront investments or lengthy setup times.
  • Workflow automation: Most iPaaS solutions help build workflows to automate thousands of processes between integrated applications.
  • Reduce operating costs: Develop and manage integrations with junior developers or business users, freeing up senior developers, and automate real-time error monitoring and logging to simplify troubleshooting.
  • Customize integrations limitlessly: iPaaS solutions like Alumio offer advanced data transformation features that enable businesses to customize their integrations to suit specific business needs.

Read more about
the different types of middleware solutions vs the iPaaS →

The future-proof need for integration

In today’s world, integration isn’t just a technical endeavor; rather, it can function as a cornerstone solution to accelerate digital transformation and business automation. The ability to integrate any new technology makes businesses future-proof, as this means that they can swiftly incorporate new trends and tools into their tech stack, such as AI and ML. Integrations also empower businesses to leverage the full potential of their technology investments by maximizing interoperability and scalability. As the digital landscape continues to evolve, the role of integration will only grow in significance, underscoring the importance of embracing this crucial capability.

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