Salesforce.com Reconsiders Referral Fees As Partners Push Back

In the wake of Salesforce.com's AppExchange leader's departure and the scheduled introduction of new, steeper fees for some levels of partner participation, Salesforce.com is taking a close look at its plans for profiting off its partner channel and hinting that it may rework some of the more controversial points. Meanwhile, partners are speaking out about their displeasure at the hard sell they get from the SaaS (software as a service) field's leading light.

In February, Salesforce.com introduced a voluntary "AppStore" referral program calling for AppExchange participants to kick back 10 percent fees on first-year revenue from all closed sales originating with AppExchange or other Salesforce.com marketing activities. The fee discomfited partners used to the usual channel economics, where vendors pay them margins, not the other way around.

"I appreciate that it's inventive, but as an ISV, I'm simply not used to that approach," said one AppExchange participant.

Salesforce.com, based in San Francisco, is planning to soon ratchet up the squeeze. Its AppStore road map calls for it to introduce a new "premium referral" tier in its third fiscal quarter, which begins in August. In return for additional demand-generation campaigns and more face-time with Salesforce.com's direct sales staff, the company wants participants to pay it 25 percent fees on the first-year value of closed deals.

While Salesforce hasn't yet started pushing "premium referral," the new fee looms at a time when partners are already on edge about the company's efforts to extract money directly from its partners' pockets. Cowen and Company analyst Peter Goldmacher put a spotlight on the issue in a research note sent out to clients last week, in which he warned that Salesforce.com's efforts to monetize AppExchange could curb partner participation.

"While all of the partners we spoke to were complimentary of the technical merits of AppEx, virtually all of them are unhappy about the fees they have to pay for leads they get from [Salesforce.com]," Goldmacher wrote. "ISV dissatisfaction at this pivotal point in the development of the platform could hinder early stage adoption critical to longer term growth. With other platform alternatives out there from Oracle, Microsoft and WebEx Connect, we are concerned that [Salesforce.com] is potentially squandering a significant opportunity to partner with the wide variety of vendors necessary to generate momentum for AppEx. If AppEx fails, an important growth driver will disappear."

In a random polling by CRN of 20 AppExchange participants, the majority of those who responded said Goldmacher's note had the ring of truth to it.
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