Salesforce.com Dangles A Big Carrot

Starting next month, Salesforce.com will kick off a new pay-for-play system on its AppExchange directory of partner products—a voluntary, but unusual, scheme that Salesforce.com said will strengthen its channel ties by giving it a direct stake in the success of its partner ISVs.

The new partner referral program, slated to launch Feb. 1, calls for participants to pay Salesforce.com a 10 percent referral fee on first-year revenue from all sales they close in conjunction with the company, either through AppExchange or with a push from Salesforce.com's direct sales staff. In return, Salesforce.com is offering referral-program participants premium AppExchange placement and eligibility for its incubator program and marketing campaigns, which carry additional fees. A second tier of the partner program, Premium, is slated to go live in August. For a 25 percent referral fee, Salesforce.com will offer partners seminars with its direct sales staff to pitch their wares, along with other demand-generation programs.

"We've gotten pretty consistent feedback that our partners are pretty interested in sharing revenue with us in exchange for being more deeply integrated in the marketing and business operations of our company," said Ariel Kelman, senior director of platform product marketing at San Francisco-based Salesforce.com.

Salesforce.com's plan inverts the traditional channel formula by casting the larger vendor as the channel for its smaller ISV partners. One of its key assets is a honeypot of 556,000 paying subscribers for its Software-as-a-Service (SaaS) sales-force automation system. That SaaS-savvy pool of potential customers gets some partners salivating—particularly smaller ISVs chasing venture-capital investments.

Marjie Zander, president of early stage Web conferencing provider ClearMeeting, said she's willing to give Salesforce.com a cut of sales it helps drive for the Northfield, Ill.-based ISV. "We believe Salesforce.com will be a significant channel for us," she said. "They're such a good fit, focused on the niche of people who do sales prospecting. Our tool is very low-tech and attractive to those users."

On the flip side, some longtime AppExchange partners are questioning the returns they get for the fees Salesforce.com charges.

"Like many other Salesforce.com marketing 'ideas,' we'd like to see the proof before eating the pudding," one AppExchange partner said about the new referral fees. About half of his company's sales involve Salesforce.com, but only a small fraction are driven by AppExchange. After spending tens of thousands of dollars with Salesforce.com for presence in marketing campaigns and customer events, his company is reluctant to spend any more without more impressive returns.

Financial analyst Pat Walravens of JMP Securities highlighted partner concerns in recent research notes on Salesforce.com. "Key partners [suggest] AppExchange is not delivering an ROI on their investments," Walravens wrote. "While the company continues to dedicate significant marketing effort to its AppExchange platform, our due diligence suggests it needs significant technology upgrades to catch up to the marketing promises."