The AppExchange Seven Years On

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The AppExchange is undoubtedly a significant portion of what makes salesforce.com unique.  Pre-integrated solutions dramatically reduce the cost to the customer to extend the capabilities of salesforce and the fact that it has already gone through growing pains means it will take other providers years to mimic its capability and impact.   

~Narinder Singh, co-founder and CSO, Appirio

Appexchange: then and now
Nine Years ago I wrote The New Garage.  It was a thought piece that tried to peer into the future of Software as a Service (SaaS) and make some predictions from business and economics perspective.  Salesforce had recently started promoting its platform in the making (then called S-Force) and encouraging third parties to develop applications that complemented and extended the basic Salesforce CRM solution so there was reason to speculate about the impact this new approach would have. 

But also, the history of business and industry is a long story of better, faster and cheaper and at that moment all three were all in the driver’s seat.  Back office software had already demonstrated many business process improvements leveraging automation and the Internet, and I thought it was time to turn some of these techniques on software.  SaaS was a good start but it had further to go, I thought.

Early impacts lead to tipping point

I saw S-Force as a tool and an economic system that could revolutionize software, making it possible to create and deploy it in a just in time fashion.  At that time you almost had to be nuts to think that.  After all, even after the initial success of SaaS, software was still something you installed and slaved over for a long time before you got it right, not something you could just plug in like an appliance.  And integration?  Don’t ask! What was I thinking? 

“We’re at a tipping point,” that’s what I was thinking.

The cold, hard truth of the matter was that you couldn’t expect to sell software subscriptions for a few bucks a month and encumber yourself with all the overhead of a traditional software company because you’d go broke.  Something had to give.  Either software would forever be something you sculpted from a block of marble or you had to figure out how to stamp out perfect copies that plugged in and just ran — no excuses.

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My bet was that we could do the stamping but it wasn’t based on any hard economic data. It was based only on the conviction that commoditization would have to continue and that something like what’s now the AppExchange would be the result.  In truth, there were predecessors to the AppExchange.  Steve Jobs opened an online store at NeXT in 1997 and six years later in 2003 Apple set iTunes in motion and today you can buy tens of thousands of apps at the AppStore for all your Apple devices. 

A store for enterprises

But those were consumer sites; there had never been an online application store for enterprise grade software until salesforce.com launched the AppExchange in January 2006.  This year marks the seventh anniversary for AppExchange -- an odd anniversary to celebrate perhaps, but a good chance to look at the AppExchange to see how well it is living up to the original vision.  Here are some of my observations.

  • The partners have built a long list of useful solutions including HR systems, field service, accounting systems, sales tools and marketing automation products.  These are systems that enrich the Salesforce experience but at the same time represent application areas where Salesforce has decided not to concentrate its resources.  Where Salesforce has stepped aside, the partners have stepped in.
  • The AppExchange created the opportunity for a very long tail of credible business solutions.  In the more than 1,700 applications you can find on the AppExchange, there is a host of small applications that just make life easier for the Salesforce customer; some are strategic and many are exceptional.  They are applications that integrate with other applications, distribute incredibly fine-grained information and automate processes in unlikely ways that just happen to work well for populations of users who need those exact solutions.
  • The AppExchange is a good place to do business for companies of any size, especially for SMB’s.  Many AppExchange vendors tell me that they make their living building and servicing their apps to the point that the permutations of Salesforce CRM with partner applications is, if not infinite, then at least very large (roughly 1700! or 1700 factorial).  I had predicted this in The New Garage but I had envisioned problems with revenue splits and single sign-on.  Both challenges have been dealt with.
  • Perhaps most importantly, enterprises go to the AppExchange to find and buy solutions.  One of the constant refrains I hear from AppExchange CEOs is that enterprise buyers find them on the AppExchange and buy solutions through it.

So here we are after seven years and the AppExchange is by all measures a big success. This blog is the first in a short series of posts that report on the AppExchange’s growth and the success of some of its many partners from small boutiques to large businesses.  This series pays particular attention to ten AppExchange partners that distinguished themselves last year including in no particular order: TaskRay, TOA Technologies, Contactually, The TAS Group, Tango Card, Zapier, Apttus, KnowWho, nCino and KXEN.

Denis Pombriant, founder and managing principal of CRM market research firm and consultancy Beagle Research Group, has been writing about CRM since 2000 and was the first analyst to specialize in on-demand computing. His 2004 white paper, "The New Garage," laid the blueprint for cloud computing. He can be reached via email (denis@beagleresearch.com) or Twitter (@denispombriant).

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