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I want to call/execute a stored procedure, which sits on an external database server, from salesforce. This SP basically takes the SF data as parameter and process it.

Is there a way to connect to other databases directly from salesforce, or creating a webservice and consuming it, is the only way.

Any suggestion would be appreciated.

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Unfortunately you cannot directly connect to an outside database from Salesforce. You will need some kind of middle man (integration middle-layer), whether it is a custom built webservice that you call or a market solution like Cast Iron, Dell Boomi etc.

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