Salesforce.com Woos Partners With AppExchange, Sandbox

Though the San Francisco-based company has not been viewed as extremely partner friendly--partners get a one-time, 10 percent fee on business they refer--it hopes that its AppExchange software development platform and showcase will nurture a vibrant partner ecosystem. What’s more, the company's newly announced membership in the Eclipse Foundation, along with an Eclipse tool kit for AppExchange, shows its desire to recruit and retain development partners, industry observers said.

"What we're all wondering here is, how do partners make money in a SaaS environment? And it's a huge question," said John Orrock, president of Okere, a New York-based Salesforce.com partner. "Traditional consulting firms sell more people, more hours. The longer they're in [an engagement] the better they like it. Benioff has changed that dynamic, but that doesn’t mean you can't make money," Orrock said, referring to Salesforce.com CEO and founder Marc Benioff.

Blue Wolf, a New York-based ISV and integrator, also has cast its lot with Salesforce.com. Its most popular product is its Enterprise Sales Force Integration, which links hosted Salesforce.com with Oracle, SAP and PeopleSoft applications, said Eric Berridge, Blue Wolf co-founder and principal. AppExchange provides partners a showcase for applications, he said.

Okere and other partners say Salesforce's new "Sandbox" will help them run proof-of-concept applications in a realistic environment without the risk of actual deployment. Okere's business is in integrating Salesforce.com into legacy environments, migrating or converting data, and implementing applications cost-effectively. That often takes a critical combination of vertical expertise and repeatability.

Okere uses its know-how in financial services and comes up with a delivery model that lets it start prototype applications on Salesforce.com's network. "We can start off with small projects. Some run from $20,000, some millions of dollars,” Orrock said. “There is money out there to be made, and we work well with Salesforce.com because we complement them. We make them look good in financial services."

Salesforce.com, for its part, maintains that partnerships are much more than reselling product and services. Company executives position AppExchange as an eBay for software applications that may or may not involve CRM per se. "Our vision is that there will be a lot of people drawn to this, people we don't know today. It's kind of a thousand flowers blooming. People can build apps from the bottom up and from the top down," said John Freeland, a veteran Accenture executive who joined Salesforce.com last fall as president of worldwide operations.

One opportunity for partners is building non-CRM applications on AppExchange, where they can be showcased and maybe even sampled before being sold. Another opportunity is vertical CRM implementations.

"What we visualize is both a vertical and a horizontal focus on AppExchange, where in a specific vertical--say pharmaceuticals--we'd provide industry domain expertise and knit together a network of ISVs and system integrators to build out a pharmaceutical edition or a financial markets edition, using AppExchange as the delivery vehicle," Freeland said.

While Salesforce.com has a small services arm, the goal is to keep it that way, according to Freeland. "What Salesforce.com realizes is it's not in our DNA to do all that high value-added consulting," he said. He cited Siebel and Oracle as examples of companies that fled into services as sales of software licenses stagnated. "Siebel became very partner-unfriendly when they stopped growing license revenue and looked at services revenue as a source of growth. That's always the risk with SAP as well," he said.

Okere's Orrock said that although there’s still money to be made in selling applications, the services opportunity is bigger and better. He said his company got in the door at a major Wall Street firm by doing a small departmental project and then expanding that foothold into more parts of the company.

Salesforce.com, which has about 399,000 users, faces some challenges. It needs to reassure customers and partners that outages suffered last quarter were not the beginning of continued infrastructure problems. On the competition front for Salesforce.com, Oracle has pledged to continue the Siebel OnDemand effort, and SAP has launched its own hosted CRM offering.

And possibly as soon as this week, Microsoft will start talking up its next release of Dynamics CRM, code-named Titan, that promises the multitenancy required for efficient hosted CRM. So far, Microsoft CRM hosting partners have had to dedicate a server to each CRM customer. Multitenancy would enable them to securely host multiple customers on shared infrastructure.