As integrations gain more popularity and importance for SaaS businesses, most companies focus on the macro benefits offered, in terms of addressing customer needs, user retention, etc. 

We have discussed all of that in our detailed article on ROI of Unified API

However, having integrations translates to a tangible impact on a company’s bottom line which must be captured. 

In this article, we will discuss the top metrics that companies can track to measure the ROI of product integrations and attribute revenue value to them. We will also share the formulas, so that you can test it for your business.

The monetary impact of implementing unified API can be measured in terms 3 direct values as well as a host of costs saved per integration. We will discuss all of them below.

Note: Typically, it takes a SaaS developer 4 weeks to 3 months  to build and launch just one API integration — from planning, design and development to implementation, testing and documentation. The number can be as high as 9 months. For the sake of simplicity, we will take the most conservative number i.e. the minimum it would take you to launch one customer facing integration – 4 weeks.

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1. Additional Value Unlocked with Each New Integration

When a new integration is added, it opens doors to new customers who are loyalists with the product being integrated. This leads to new revenue which can be added.

‍To calculate the revenue add:

1. Number of customers with the partner X (% of these customers who could potentially become your customers/100) = Total new opportunities
2. Total new opportunities X (Your average close rate/ 100) = Estimated new customers
3. Estimated new customers X average annual revenue per customer = Additional revenue generated via integrations

Taking a few assumptions such as:

• Your average close rate = 5% 
• Average revenue per customer = $5000

Additional revenue with each integration can be:

1. 10,000 X (1/100) = 100 new opportunities
2. 100 X (5/100) = 5 new customers
3. 5 X USD 5,000 = USD 25,000

Each new integration has the potential to unlock ~USD 25K or more to your revenue base each year. 

2. Accelerated Sales Cycle and Revenue Realization Time

Next, you need to calculate how integrations impact your sales cycle and revenue realization timelines.

Compare how long it takes for your sales team to close deals when integrations are involved versus when there is no integration requirement or you don’t have the requisite integrations. 

Suppose if you are able to close the deals with integrations 3 weeks faster, then the ROI translates to: 

No of weeks saved X annual customer revenue/ 52

= 3 X (5000/ 52)

= 3 X 96

= ~USD 280/ customer

If you build integration in-house, the delay in deal completion due to the longer integration launch time can cost you ~USD 300 per customer. Plus, the

Retention and Renewals

Integrations directly have an impact on customer retention and renewals. If you offer mission critical integrations, chances are your recurring revenue from existing customers will increase. To calculate the ROI and revenue addition from this angle, you need to: Capture the renewal rate of customers using integrations. 

Let’s say renewal rate is 20% higher than those who don’t use integrations, then the ROI becomes:

Number of customers renewing without integrations: 100 

Number of customers renewing with integrations: 120 

Annual revenue per customer: USD 5000

Then,

Additional revenue due to integrations: Average revenue per customer X Additional customers due to integrations

= USD 5000 X 20

=~USD 100,000

Total Cost Saved with Unified APIs

Once you have a clear picture of the revenue derived through integrations, let’s look at how unified API makes this revenue realization faster, greater and better:

Assumptions:

Salary of a developer: USD 125K

Average time spent in building one integration: 6 weeks*

Average time spent on maintaining integrations every week: 10 hours 

*This is a very conservative estimate. In reality, it usually takes more than 6 weeks to launch one integration

From a simple cost perspective, the ROI of using a unified API vs a DIY approach translates to 20X cost savings in direct monetary terms.

Other RoI Metrics

Some of the other areas to gauge the increase in ROI with unified API include:

Assumptions:

Annual revenue per customer: USD 5,000

Minimum average time spent in building one integration: 6 weeks

Average annual revenue of a big deal: USD 70,000

Average time spent on maintaining integrations: 10 hours/ week

It is evident that both from a cost and income lens, a unified API brings along significant ROI which reflects tangible impact on the business revenue. 

Note: We have taken a very conservative measure while choosing average time to build integrations, average developer salary and number of people associated with building integrations. 

In reality, one integration can take up to a quarter to build one integration, the average annual compensation package of a developer can be up to $250,000 and along with one or more developer(s), a single integration also requires the bandwidth of product managers, design team or project managers. This means the cost incurred for building integrations in-house is actually higher.  

You can put the formulas above in an Excel sheet and check how much every integration is costing you each week. Download this ROI Calculator for your future reference.

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