Salesforce.com's AppExchange To Broaden the Appeal of On Demand

Salesforce.com has taken more than a few gambles since its inception. In September, the company unveiled its latest risk: creating an eBay-style Web site on which its partners and customers can create and exchange on-demand applications and disseminate them to a wider audience and for a wider range of tasks than ever before.

First unveiled at the Dreamforce '05 conference in San Francisco, AppExchange is the vehicle that Salesforce executives hope will help the company reach its broadest audience yet. The basic site already is up and running at www.salesforce.com/appexchange, allowing visitors to preview various applications. This winter, Salesforce will release the full version, which will enable users to fully test, review, buy and trade applications and deploy them on the Salesforce platform, building a knowledge base similar to what open-source developers have created.

But this is a for-profit venture, one that could end up benefiting ISVs while also padding Salesforce's bottom line. One early-adopter ISV is DreamFactory, a Los Gatos, Calif.-based provider of customization and integration technology for on-demand systems. DreamFactory built the Dream Team application for Team Work Automation for the AppExchange preview site. Company CTO Bill Appleton says the system works like the old object-oriented programming theory that lets developers reuse basic code rather than build everything from scratch each time.

"For Dream Team, we created five custom objects but made use of 15 existing ones, so we saved about 75 percent off the workload because the core infrastructure was already there," he said. "We only had a few weeks to put the application together, but we're really thrilled with the results."

AppExchange will let developers post its applications and either trade them with other developers or get paid every time an end user purchases it. Salesforce will act as intermediary and take a small, but still undetermined fee, for every such transaction, but CEO Marc Benioff seems to be indicating that the monetary gain from these individual transactions will be secondary to his company's real goal of broadening the reach of on-demand computing.

"We want more and more seats with each customer; (for example) right now we have about 2,600 seats at SunTrust Bank, which has about 26,000 customers, so I consider us to have 10 percent market share with that customer," Benioff said at Dreamforce. "AppExchange is the fundamental piece we need to accelerate Salesforce.com for non-CRM applications. We can do this a lot faster this way than we could on our own because we'll have a lot of help."

The AppExchange site currently has about 70 applications available for preview, about half of them built by outside developers, but Benioff expects to have many more in short order.

Analysts at the show agreed that Salesforce has hit upon a trend that is way more "when" than "if."

"We're going to see a lot more pressure on IT costs because CTOs and CIOs aren't going to continue to write checks for it," said Bruce Richardson, an analyst with AMR. "The packaged applications market will continue to struggle, and we'll see broader platforms like Salesforce take off with SMBs, and as soon as we can convert some of the 'gray hairs' to it, we'll see a lot of growth in the enterprise as well."