Picking the Right API Partner: Important Due Diligence Considerations

It wasn’t long ago that expanding the capabilities of a SaaS platform required significant time, man-hours, and budget. This limited a business’s ability to grow and provide customers with services they wanted in a timely manner. But all that has changed. Today, adding functionality can be as simple as finding the right API partner.
To achieve success and delight customers, however, it’s critical to find the right technology partner — and that starts with thorough due diligence. Skipping this important step is unwise given that you will be relying on this partner to provide some underlying infrastructure to your product offering.
Here are some key questions to ask when looking to expand the capabilities of your SaaS platform:
What experience does the vendor have?
One of the first things to consider is the experience of the companies you’re evaluating — it’s a given that you should explore more than one vendor. Question how long they’ve been in business and what their track record is.
Longevity isn’t everything, but you need to be careful about companies that have limited history. If they’ve only worked with a few platforms like yours, they may lack the necessary understanding of potential issues.
For example, if you focus on small businesses, ask how many small businesses they have served. If they are focused on bigger companies, they may not prioritize small business customers. Another concern is that they may not adequately understand small business needs.
Asking for customer references is a critical part of due diligence. Look at the logos displayed on their website and then verify their claims. Reach out to a couple of those businesses and verify for yourself that they have worked with the company you are interested in and how well they worked together.
Few people check references. They want to believe what they read (for the sake of speed), and the result is that some companies pad their resumes, so to speak.
Is it enterprise-grade?
If a vendor claims their API is enterprise-grade, it should mean that the technology has been proven, at scale, and that they’ve worked with a long list of customers and solved for ALL of your primary use cases. Ideally, they need to have worked with sophisticated customers and enough various use cases that most edge cases are already ironed out.
Ensure that enterprise-grade isn’t just a future goal, but a current reality.
Avoid handing off critical business functions to a brand new API provider. If a vertical SaaS platform provides accounting functionality, their customers expect it to be tried and tested.
Enterprise-grade has become marketing terminology, but the term has real meaning and value and shouldn’t be used lightly.
Can they deliver what they promise?
Be wary of vague claims. For instance, when vendors use the word “like.” If they say they have customers “like” Shopify, it doesn’t mean anything, other than an acknowledgement that Shopify is not their customer.
Marketing lingo on websites, press releases, and advertisements can be misleading. Even media coverage can be incorrect when a story is written based on a press release without any research.
Read everything carefully, and don’t be shy about questioning any statements or promises. Ensure they really can deliver on their promises.
One company may differentiate itself by stating they have more comprehensive solutions than their competitors. Ask them what that actually means, specifically. If it matters to you, drill down on that.
At the end of the day, it’s essential you know what you’re paying for and that it aligns with your customers’ needs. Ensure they can quickly answer customer questions and resolve any issues when the new features are launched.
For Tight’s API, we emphasize experience and value. Coming from a mission-critical ERP background, we ensure that every team member we hire adds value to the collective experience we offer our clients.
If you’re responsible for procuring an embedded accounting product that can be white-labeled on your platform, which serves thousands of customers, you need to ensure it’s truly enterprise-grade and that you’re getting features that genuinely add value for your customers.
I encourage you to download and read Cornerstone Advisors' recent report, New Revenue Opportunities From Embedded Accounting, to learn more about what small businesses need and the current opportunities for industry-vertical platforms.
Disclaimer: The information contained in this document is provided for informational purposes only and should not be construed as financial or tax advice. It is not intended to be a substitute for obtaining accounting or other financial advice from an appropriate financial adviser or for the purpose of avoiding U.S. Federal, state or local tax payments and penalties.
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