Salesforce.com AppExchange: The Next Microsoft?
Way back in 1986, there was a then little known company that went around talking to anyone who would listen. Their pitch was that they were going to be the next big platform, upon which thousands if not millions of applications would be built. At the time, hosted services (the ASP model) did not exist as they do today, but their vision was that if they built a platform with a core API set and functionality, others would build applications on top. This platform became known as Microsoft Windows.
Microsoft was highly successful gaining adoption of Windows because they appealed not only to end users but also to application developers. They provided more than just a technical platform. They also provided marketing programs, channel resources, product feedback, and a great developer program, through a group called DRG, or the Developer Relations Group. Many people in fact say that it was the openness of the platform, even with all its imperfections, and the existence of the DRG that let Windows win.
Today, Salesforce.com is going around pitching AppExchange, its platform to enable others to deliver on-demand applications. Already, more than 280 applications are available on AppExchange, with more coming online every day. Today, these applications are primarily targeted at the Salesforce.com ecosystem, but I anticipate that in the future, they will target other areas as well, as Salesforce.com itself expands its core offerings and makes it core platform available on a wider basis.
What sets Salesforce.com apart from eBay, and Google, and even now Microsoft is that Salesforce is specifically stating that they are building a platform for others. That the core salesforce.com application was actually just the first instantiation of a much broader and much bigger vision: that is, to build a platform for all on-demand applications.
What does this mean for venture investors? Some will argue that you cannot build a big enough company on Salesforce.com to merit venture investment. That is, that because salesforce is the platform, whatever you are building is just a product and cannot also be a platform; therefore salesforce will always be in a position to absorb your functionality into its core product. Therefore, while such companies may be interesting investments for the right class of investor and may generate significant revenue, they will never be big enough for venture investment and they will always be at risk of Salesforce either eating their lunch or buying them at a lower than desired valuation should the company decide to do so. Of course it can be argued that Rational Software built a very successful business staying 18 - 24 months ahead of Microsoft on developer tools.
That said, I believe that AppExchange is one of the most interesting platforms around today. It is interesting because the company is seriously committed to it from both a technical and marketing perspective; it is quickly gaining adoption; and it could be a rapid technical and customer adoption accelerator for a whole host of new and existing companies. It's worth a very serious look. It could very well be the next Microsoft.
Microsoft was highly successful gaining adoption of Windows because they appealed not only to end users but also to application developers. They provided more than just a technical platform. They also provided marketing programs, channel resources, product feedback, and a great developer program, through a group called DRG, or the Developer Relations Group. Many people in fact say that it was the openness of the platform, even with all its imperfections, and the existence of the DRG that let Windows win.
Today, Salesforce.com is going around pitching AppExchange, its platform to enable others to deliver on-demand applications. Already, more than 280 applications are available on AppExchange, with more coming online every day. Today, these applications are primarily targeted at the Salesforce.com ecosystem, but I anticipate that in the future, they will target other areas as well, as Salesforce.com itself expands its core offerings and makes it core platform available on a wider basis.
What sets Salesforce.com apart from eBay, and Google, and even now Microsoft is that Salesforce is specifically stating that they are building a platform for others. That the core salesforce.com application was actually just the first instantiation of a much broader and much bigger vision: that is, to build a platform for all on-demand applications.
What does this mean for venture investors? Some will argue that you cannot build a big enough company on Salesforce.com to merit venture investment. That is, that because salesforce is the platform, whatever you are building is just a product and cannot also be a platform; therefore salesforce will always be in a position to absorb your functionality into its core product. Therefore, while such companies may be interesting investments for the right class of investor and may generate significant revenue, they will never be big enough for venture investment and they will always be at risk of Salesforce either eating their lunch or buying them at a lower than desired valuation should the company decide to do so. Of course it can be argued that Rational Software built a very successful business staying 18 - 24 months ahead of Microsoft on developer tools.
That said, I believe that AppExchange is one of the most interesting platforms around today. It is interesting because the company is seriously committed to it from both a technical and marketing perspective; it is quickly gaining adoption; and it could be a rapid technical and customer adoption accelerator for a whole host of new and existing companies. It's worth a very serious look. It could very well be the next Microsoft.
2 Comments:
With 300 apps or more on the AppExchange, some companies are using and paying for 10-30 different applications by different providers which makes support a nightmare. The AppExchange will not move salesforce upstream, rather it will spread the word amongst developers and start-ups that could potentially one-day work for or run a larger company. If you were to pay for half of the apps you will end up paying $4700/user/month; although highly unlikely!
I think the AppExchange is Salesforce’s way of getting free Research & Development work done by smaller developers before they incorporate these features into their next release or buy them out for dirt cheap like what happened with the Sendia deal.
And what strikes me the most is many of the so-called AppExchange applications are developed by SFDC themselves and advertised as free when you actually have to pay for them because you will reach your TABS limit very quickly and end up paying $195/user/month for the Unlimited Edition.
If you look hard at the Time Savers section for example, you will find many small apps that are nothing but usual features in any CRM system offered on demand by NetSuite, RightNow, Salesboom.com and Entellium at no extra cost.
As an Administrator of Salesforce.com account, you will not be able to mass email your users out-of-the-box! Instead you must install an app from AppExchange, and you might be forced to upgrade your edition or purchase more tabs! Last I checked, even ACT! Version 5.0 (4 years old) has that feature standard!
Aside from that, creating a platform for developers to play with is a great marketing idea.
Thanks for sharing informative article on Salesforce technology. Your article helped me a lot to understand the career prospects in cloud computing technology.
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