A Force to reckon with - Emergence of Salesforce.com’s AppExchange Platform
[tags]Salesforce.com, Marc R Benioff, SaaS, Web Services, EBay, business software, ISV, Plateform, Imfinity Expertise
[/tags]
It was a bright spring afternoon, 7th of May in 2003, as I made my way into the packed Terman Auditorium at Stanford University. We had gathered to hear Marc R. Benioff, the founder of Salesforce.com, share his vision on how his company would change the world of software as we knew then.
Benioff founded salesforce.com in the spring of 1999 with the intention of creating information utilities that would make traditional enterprise software obsolete. A veteran of more than 20 years in the software industry, including stints in Oracle and Apple Computer, Benioff pioneered the concept of “The End Of Software,” demonstrating how Web Services would replace large-scale corporate applications through the use of the Internet.
We sat in awe as he rattled off his big, hairy, audacious goal to reshape the customer relationship management software market with the “Software-as-a-Service” (SaaS) delivery model. That afternoon I felt I was in the presence of a powerful higher being. It wasn’t burly Benioff. It was the power of the idea. Ideas like Salesforce.com, Google, EBay or Priceline that entirely change the rules and landscape of the market and leave the incumbents sleepless.
Salesforce.com has come a long way from being an on-demand computing evangelist. It took the web-based CRM application and focused on integrating salesforce.com with other applications and web services using the sforce platform. It then allowed customers and vendors to customize salesforce.com to their individual needs. Alongside, it has been engaging with a wider range of developers, integrators and partners to help accelerate adoption. It stands now with more than 18,000 customers, 351,000 subscribers and revenues touching USD 218 million till date during fiscal year 2006.
The intention to not just remain an on-demand service provider, but position itself as a platform was clear with the multiforce initiative, an on demand “operating system” to enable salesforce.com customers to access multiple applications from a common desktop environment, sharing one data model, one user interface and one security model. All this change is not happening in isolation. The market and competition have morphed and moved and rivals like Siebel (now owned by Oracle) and mammoths like Microsoft and SAP have either entered the fray or are expected to launch competing offerings soon. All vying for pieces of a broad on-demand software market expected to grow to $10.7 billion in 2009, from $4.2 billion last year, according to the researcher IDC.
Last year, on the 12th of September, Benioff was back on stage to announce what was brewing in Salesforce.com. He called it the “EBay for Business Software”. An online marketplace where software makers and customers can swap and sell applications they develop. On the 17th of January 2006 “AppExchange” was launched as scheduled and we sang hallelujah!
What is this AppExchange and how will it affect Salesforce.com, their customers and partners? The most important question that we, at Imfinity, are evaluating is the implication to Independent Software Vendors. Why should you sit up and take note?
The EBay of Business Software
An analogy used by Benioff to describe AppExchange is to compare it to the EBay or iTunes Music store for business software. It is positioned as the first online marketplace, where buyers and sellers can host, share and sell. Some applications are add-ons to Salesforce.com CRM, like a email marketing application, or it can provide a totally different functionality to the enterprise, like a payroll management system. Buyers can search the repository to find software that they need, read other users’ reviews of the solution and test drive applications. On purchase the applications can be downloaded into the multiforce desktop and customers will be able to install and uninstall AppExchange applications – just as they would in their Windows desktop. AppExchange supports and integrates new applications and even parts of applications which allows customers to share parts of their application like reports, dashboards, and other functionality with their end customers and partners.
Salesforce.com, its developers, partners and customers can modify existing applications or build new ones. The AppExchange platform combines the development capabilities and tools of sforce, customforce and multiforce programs under one umbrella. Is it then just pure re-branding and positioning? I would think it goes deeper than that.
For one, Salesforce.com has been evangelizing a critical mass of developers and partners which is crucial for any platform vendor. SaaS has received wider acceptance with customers appreciating the strengths of the delivery model. Current customers are comfortable with the platform and want add-on or new applications. Potential customers are evaluating the cost advantage and breadth of applications available on competing platforms.
Vendors of applications are looking at platforms from the perspective of its customer reach and future growth. The AppExchange is perfectly positioned for the numerous niche independent software vendors to reach their customers quickly and with low costs. As Benioff, puts it – it is about exploiting the long tail of software. The timing is well suited too. Internet and application development technologies have matured and they are allowing customers and vendors to drive value from such an application exchange platform.
Top reasons for ISV adoption of SaaS model like Salesforce.com
- Installed base and prospective growth in customers.
- No-cost development environment, with database, server and storage resources, all accessible using just an internet browser.
- Common application environment used by all customers and assured forward compatibility.
- Standardized pre-installed common services including user interface, logon, security, data model and integration services.
- Free access to robust, secure, highly available, world-class deployment environment.
Source: Summit Strategies Inc
The War of Platfroms
A lot of great things have been said about the SaaS model and Salesforce.com’s AppExchange. Salesforce.com’s name is being taken in the same breath as Microsoft, IBM, SAP and even Google. Positioning yourself as a platform vendor is not just about putting up a nice vision statement on the corporate website. It requires immense stamina, financial leverage and marketing muscle to make a wave out of the ripple. The incumbents, like Microsoft and IBM, have spent decades building an ecosystem of developers, business applications, software vendors and partners who have ensured the success and sustainability of their platforms.
Salesforce.com has successfully created and is riding the wave of on-demand software or SaaS applications. It is still to be seen how well it can demonstrate to ISVs its commitment to champion and build the platform, how well it can crystallize the value proposition of the platform and applications, and, how soon it can grow the base of developers and system integrators and equip them with the right training and tools. Above all, the ISVs will expect a clear and rewarding revenue share model with strong growth prospects.
On that spring afternoon Benioff gave a personal and compelling glimpse of Salesforce.com. Some of us shrugged it off, most of us sat up and listened, and some others became loyal foot soldiers of the Idea. The buzz of Silicon Valley has since spread and is a constant and growing hum in many parts of the world. Salesforce.com recently had a well publicized AppExchange launch event in Singapore. The ISVs of the region are vital for platform vendors, especially the on-demand ones. The ISVs help reach the large SME market space. The coaxing and cajoling of ISVs and the turf war between the platform vendors has long begun.
The war of the platforms will be an ongoing one and we don’t need to twiddle our thumbs and wait for the winner before we take a bet. As ISVs your key question must be “Is my application delivering solid business value to my customer?” The choice of platform comes next. With the key question answered your next question is “Can I serve my customers better and reach more prospects by betting on a platform or taking the on-demand application strategy?” For this you should set aside resources to evaluate the new and upcoming platforms. Every serious platform player has an ISV evangelism and support program in place. These partner programs are a great way to get you equipped to evaluate the platform and leverage on the vendor marketing muscle to get your products wider recognition and branding. Take a look at the listed links below for more information.
At Imfinity we enable ISVs craft an informed product platform strategy. So sit up, start thinking and leverage on our expertise to make a difference to your product.
Microsoft ISV Community Center
http://msdn.microsoft.com/isv/partnering/default.aspx
Salesforce.com – Become a Partner
http://www.salesforce.com/appexchange/becomePartner_appexchange.jsp
Sources
http://www.salesforce.com/us/appexchange/resources/SalesforceBulletin.pdf
http://www.salesforce.com/us/appexchange/resources/5AP-04_Salesforce_MS_07-22-2005_v2.pdf
http://www.salesforce.com/us/appexchange/resources/openair-case.pdf
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