Share this content

Salesforce bids to become the Microsoft of the On-Demand world

16th Jan 2007
Share this content is attempting to position its Apex development platform as the underlying infrastructure of choice for hosted applications in a bid to become “the Microsoft of the On-Demand world”.

Apex, which was launched in October last year, is used to develop Salesforce’s own applications and comprises a Java-like programming language, a screen builder and development tools.

But it also includes platform services such as single sign-on capabilities and a common user interface and data-sharing model, which provide the underlying application plumbing. A new version of Apex is scheduled to ship later this week when the vendor also releases the Winter 07 edition of its CRM applications.

Although a wealth of such environments are already provided by traditional infrastructure players such as IBM and Bea Systems, Phil Robinson, Salesforce’s chief operating officer for sales, believes that Apex will become one of the organisation’s key engines for future growth.

“Salesforce wants to be to On-Demand what Microsoft was to client/server. So while Windows became the platform of choice for client/server and people built their applications on top of that, we want the same to happen with Apex in the software as a service world,” he explains.

As a result, in order to seed the market, the company is now enabling third party developers to use the Apex tools for free in order to build packages that run as native extensions or add-ons to the Salesforce application suite.

Those ISVs that want to create their own-branded packages to sell to non-Salesforce customers, however, can license AppExchange OEM Edition for $25 per user, per month. This provides them with access to the Apex platform for development purposes, while Salesforce hosts the resultant package on its AppExchange application marketplace. Four such OEM partners have signed up to date - DreamFactory Software, myLoanBiz, Rally Software Development and Remend.

“Apex allows our partners to build their own applications, and our partner ecosystem, that is AppExchange and AppStore, enables customers to buy them in an eBay-type of environment,” says Robinson. “We have over 500 applications written by more than 230 partners, but when someone installs them they run from our data centre. This means that we become the aggregators of a wide range of applications running in our data centre and using our infrastructure.”

As to how Salesforce expects to differentiate itself from existing infrastructure players, Robinson says that the answer is simple: “You can either go for an on-premise platform combination such as that offered by Bea or you can go for an on-demand one. And we are currently the only vendor today that provides an on-demand platform.”

But David Bradshaw, a principal analyst at Ovum, is not sure that things will be quite as easy for Salesforce as it thinks. “It’s really too early to say whether it will succeed. I think someone will, but I’m not sure who yet. My belief is that rivals will appear that do a similar kind of thing and it’s early days yet, so there’s still all to play for in this space,” he says.

For one thing, Bradshaw points out, the Apex development environment is still very immature, and for another, if Salesforce really wants to make its partner strategy in general and its OEM strategy in particular work, it will have to provide high levels of partner support, not least in terms of direct marketing.

But the company believes that it has already come up with the answer to this problem in the shape of its new AppStore commercial services strategy, which is based around the AppExchange marketplace. According to Marc Benioff, Salesforce’s chairman and CEO at the launch earlier this year, the initiative will provide customers with “a single source for trying, buying and deploying on-demand applications” and, it is hoped, end up being the equivalent of ‘iTunes for business software’.

On the partner side of the equation, meanwhile, AppStore will apparently remove “the burden and expense of building out a sales and distribution channel”, particularly for small partners on a shoestring budget.

In terms of marketing services, for example, the vendor will provide two levels of referral service. The standard level, which is due to kick in this quarter, will provide partners with premium placements in AppExchange searches and catalogues as well as access to other marketing programmes and events. For this, Salesforce will charge a10 per cent commission on any sale made.

Premium referrals on the other hand– at a 25 per cent commission rate- will provide partners with all of the above, but also allow them to participate in both demand generation programs and seminars to educate Salesforce’s customer-facing employees about the benefits of their offerings. This initiative will be offered as of the third quarter of this year.

By the fourth quarter, however, the vendor intends to introduce a raft of online ordering, billing, invoicing and product collection services. These will be called AppStore Checkout and Salesforce will charge partners a 20 per cent commission on any sale processed to use them.

This means that partners could end up paying the vendor as much as 45 percent of all their AppStore-related revenues during the first year of using the service. After that, only the ongoing 20 per cent AppStore Checkout commission would apply though.

Quite a change of policy for a company that has to date focused on making money from its partners indirectly (by extending subscriber numbers in customer sites as they purchase new third party applications).

But where else does Salesforce intend to find new revenues as it attempts to double sales and become a $1 billion company at some unspecified time in the future?

One tack will be to continue broadening out its definition of CRM as it moves into new areas. Traditionally, CRM has been categorised as sales, service, marketing, customer data and analytics.

“Because of our name, we tend to be thought of as just a sales force automation provider, but CRM is much more than that so we’re doing a lot of work on building more products around services and support in areas such as call centres, telesales and partner relationship management,” says Robinson.

Another focus will be building up the company’s presence outside of its core domestic US market, particularly in Europe. The region currently accounts for less than 20 per cent of total sales, but Benioff has made it clear over recent months that he sees cracking Europe as one of the organisation’s big new goals.

“As a global company, we have a $1 billion dream, but to achieve this as a steady-state technology business, Europe needs to generate between 30 and 40 per cent of revenues as does Asia-Pacific. A lot of technology companies have got to the size we are and plateaued so it’s important to have a diversified product portfolio, to play multiple cards and to play them at the same time,” Robinson explains.

To this end, Salesforce hired Lindsey Armstrong, former vice president of Europe, the Middle East and Africa (EMEA) at Symantec, as co-president of its own EMEA region in October last year to focus on interacting with customers about their day-to-day concerns. Steve Garnett, the other co-president is focusing on outreach and evangelising the Salesforce gospel.

Robinson explains the rationale of having two European bosses: “Dell has a two-in-the-box strategy for running the business so we’re trying it out too. Kevin Rolands and Michael Dell both run the company and replicate the model throughout the business and it seems a very effective way of doing it.”

But Salesforce is also building up its management team elsewhere and, as a result, has hired Andy Jacks, who used to run Pillar Data Systems, a storage company backed by Oracle’s chairman Larry Ellison, to head Northern Europe.

“One of the challenges of a high growth business like ours is managing growth. That’s about hiring, retaining and motivating people around a common goal, but we’ve now got a leadership team in place that is experienced in working in high growth markets and that’s very important,” concludes Robinson.

Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.