5 advantages of compound software

Recently, Rippling CEO Parker Conrad appeared on TechCrunch’s podcast Found, where he pushed back against the conventional wisdom for building business software, which says to focus on a narrow, niche product offering and build deeply functional point solutions. 

“I think that as a result of that conventional wisdom, we've been building business software wrong for the last 20 years,” Parker said.

With Rippling, Parker and the team have done the opposite in the pursuit of better serving business’ needs. Instead of a narrow, best-in-breed point solution (or point-SaaS), Rippling is compound software, meaning it builds multiple products in parallel. 

Over the last few decades, we’ve watched point solutions grow—but now, we’re seeing that trend start to reverse. Point solutions have proliferated, but they don’t best serve the needs of today’s companies. We believe compound startups are the future of software. 

The rise of point-SaaS

Parker points to the shift away from on-premise solutions as the time when the rise of point-SaaS solutions began. Legacy, megalopoly vendors like SAP, Oracle, and Microsoft were poorly positioned to rebuild their technology for the cloud, creating a moment-in-time opportunity for competitors to peel away specific features and products as cloud-based, standalone point-SaaS companies.

“Look back 15-20 years, when you could do anything in the cloud and be the only one in that niche, and it would be reasonably successful,” Parker said. But two problematic side effects emerged. First, businesses now have to manage dozens (or even hundreds) of pieces of software, which is staggeringly inefficient.

Second, the applications themselves are extremely narrow in focus, which tends to limit their capabilities, especially in areas like reporting, permissions, and automation.

5 advantages of compound software

Both side effects can be solved by compound software, where multiple parallel business applications are natively built in the same system.

Compound software has five key advantages over point-SaaS competitors.

1. Business applications are better integrated with one another

When choosing point-SaaS solutions, you are often limited by what can integrate with the other tools in their tech stack. As you add more and more narrow, single-feature solutions, it becomes more difficult to find software that not only offers features that meet new needs, but also integrates with all existing other tools.

A compound software solution, on the other hand, offers applications that are built in parallel with one another—so you don’t have to worry about whether the tools fit into your tech stack; they automatically, seamlessly integrate with one another. Take Rippling, for example, where all your apps across HR, IT, and finance are unified and built from the ground up to work together seamlessly.

2. Business applications are more integrated with underlying data

When Parker created Rippling, he understood that all business apps—not just HR software—need employee data to power advanced reporting, workflow automations, and more. 

“We really came to see employee data as not just this thing for HR software, but as a primitive that was really critical for business software in a much broader sense,” he said.

So what if every piece of software operated from the same set of employee data? That’s the second benefit of compound software: Its applications are all built on top of the same underlying data, so they’re all seamlessly integrated with it.

And that’s how the idea for Rippling was born: business applications across HR, IT, and finance that aren’t just seamlessly integrated with each other, but built on top of a single source of truth for employee data, so they don’t require all the manual upkeep of siloed applications.

3. Platform capabilities amplify impact

Point solutions may offer deep functionality for the problem they solve, but they operate in a vacuum—their individual function isn’t part of a bigger picture.

A compound software solution, on the other hand, is the bigger picture. When multiple applications and products are offered as part of the same software, it becomes more than just a tool—it becomes a platform. And that means capabilities like reporting, analytics, permissions, approvals, and workflow automations are deeper and more comprehensive, since they work seamlessly throughout the platform and all its apps.

Rippling’s unified platform is what drives its powerful automation, analytics, and more. For example, Rippling offers custom reporting where you can build any report you want, and then slice and dice the data using visualizations, filters, drilldowns, pivots, and other advanced analysis tools. Another example is Rippling’s role-based permissions—you can build user groups using attributes based on any employee data, like level or location, and then set up automations to let Rippling enforce your policies for you.

Compare that to a stack of point-SaaS solutions, each with its own reporting, automation, and permissions functions, each operating independently—for a single tool—in a silo.

4. A common user experience simplifies every step

When using compound software, you only need to learn one set of UX patterns, as opposed to a different set for each point-SaaS solution in their tech stack. 

Rippling is deeply customizable—you can create reports or build custom workflows without needing any coding knowledge. And once you learn those skills, they give you superpowers that apply across all of Rippling’s products and applications, empowering you to customize the experience to fit your needs. You can also hit the ground running with no learning curve whenever a new Rippling product is introduced.

5. Price advantages prevail

The final advantage compound software offers is one that’s often overlooked during discussions of the pros and cons of point-SaaS solutions: the cost. Compound software companies that offer more features and applications can offer bundled pricing and long-term contracts that save their customers money.

Point-SaaS companies, on the other hand, who can amortize sales and marketing and R&D costs over only a single SKU, become more and more expensive as they try to compete with one another—and with compound solutions. Clients that choose artisanal point-SaaS software will increasingly pay a premium for doing so.

The wave of rebundling

As the cloud software ecosystem matures, companies and their leaders who take advantage of compound software will reap the benefits we’ve covered in this article, from deep systems integrations to time and cost savings. And Rippling is ready to lead the way.

Want to learn more? Listen to Parker’s appearance on TechCrunch’s Found podcast.