AppExchange matures as vendors grow up

Profile picture for user pwainewright By Phil Wainewright May 1, 2013
Summary:
Ten years old next year, Salesforce.com's AppExchange ecosystem is maturing, with a growing roster of partners having built substantial software businesses running native on the Salesforce platform, including one that's reported to be prepping an IPO later this year.

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According to a favorite adage of Salesforce.com CEO Marc Benioff, people always overestimate what you can do in one year and underestimate what you can do in a decade. So it's timely to start re-evaluating Salesforce's AppExchange, which will be a decade old next year.

Originally designed to allow enterprises to add mashups and custom objects to the core Salesforce application, many were sceptical that independent software vendors (ISVs) would choose to tie their fortunes to the whims and vicissitudes of another vendor's platform — least of all one running in the cloud. Benioff's insistence right from the start that ISVs should flock to the platform seemed far-fetched at the time. Eight years on, there are indeed substantial, multi-million-dollar ISV businesses running entirely on the Salesforce platform.

This year may well see the first stock market listing of a Salesforce platform vendor, with Veeva reportedly laying plans for a Q3 offering. Founded in 2007, the startup has carved out a leading position providing cloud CRM and content management to the global life sciences industry, stealing away market share from on-premise incumbents Oracle and Cegedim. It has over 150 customers and more than 400 employees globally and demonstrates the capital efficiency of the platform model, having raised less than $10 million in venture capital. The company is profitable and cashflow positive, and is said to have generated around $120 million in annual revenues last year.

At a Business App Bootcamp event laid on by Salesforce.com in London yesterday, plenty of ISVs and VCs were willing to talk up the advantages of letting the cloud vendor carry the burden of providing a powerful, secure and constantly evolving infrastructure, leaving its partner ecosystem to focus on business value.

For enterprise customers, the existence of a broad and thriving ecosystem opens up many more options when extending their core Salesforce implementation. As Francis Pindar, technical consultant at health and safety agency the British Safety Council told yesterday's bootcamp attendees, "The data is within the ecosystem of Salesforce, we know it's got the same security, the same data." Installation is so simple that the organisation has built up a roster of 19 AppExchange applications, he said: "It kind of works in the background, you just install [the app] and it's there." Not all of the 19 used by the charity are native platform apps — the list includes Google Apps for example — but a substantial number are, including the organization's financials, which run on FinancialForce.com.

For Salesforce, its ecosystem of partners lets it address areas of functionality or vertical markets that it doesn't have the resources or incentive to invest in itself. No surprise, then, that the company today announced a new €5m ($6.6m) investment fund that has been earmarked for winners of an Innovation Challenge to find new candidates to build native apps on its platform.

The winner of an earlier competition run by Salesforce.com back in 2008 was ServiceMax, which resulted in a $2 million funding round from Emergence Capital. The field service management vendor has since raised more than $49m, employs 175 people globally and serves hundreds of customers including big names such as DuPont, Electrolux and Pentair.

Disclosure: Salesforce.com and FinancialForce.com are Diginomica partners at the time of writing.

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