Boston-area Software Firms Hitch Their Wagons to Salesforce; Say Ride Can Be Rough But Profitable

1/14/09Follow @wroush

“Platform” is such an overused buzzword in the software world that my ears start oozing cerebrospinal fluid every time I hear it. But my reaction notwithstanding, history does include a few genuine examples of devices or programs developed by one company that became critical platforms for new products from a host of others. The Windows operating system is the archetypal case—and in more recent years there are examples like Facebook, which has become a playground for hundreds of third-party developers, and the Apple iPhone and iPod Touch, the home environments for what is now probably history’s largest collection of mobile applications. Both Facebook and the iPhone boast substantial communities of third-party developers right here in Boston.

Now there’s a new platform in town. It’s in its early stages, and it’s much less familiar to average software users, but may eventually have the same sort of impact on the business world that Facebook and the iPhone are having on consumers. It’s Salesforce’s Force.com AppExchange—an online marketplace where users of the San Francisco company’s popular online customer relationship management (CRM) package can buy and download add-on applications that greatly extend Salesforce’s capabilities.

In some cases, these programs add features that would fit perfectly as built-in parts of the Salesforce.com platform itself. In other cases, AppExchange applications add features that have little or nothing to do with CRM or the sales process, but simply become more powerful when delivered on-demand using Salesforce’s existing software-as-a-service (SaaS) infrastructure.

Force.com AppExchangeJust as in the Facebook and Apple cases, software companies around Boston have been quick to take advantage of this new platform—either by building new “native” Force.com versions of their products that run entirely on Salesforce’s cloud-computing infrastructure, or by creating connectors that allow existing Salesforce users to tap into their applications without having to leave the Salesforce (NYSE: CRM) environment. For the last few weeks I’ve been canvassing local firms with apps in the AppExchange, and from what I can gather, it’s becoming an important adjunct to many organizations’ main product lines and sales channels. This being the business world, the new platform isn’t taking off in the red-hot way that iPhone apps did after the launch of the iTunes App Store last summer—but the AppExchange already offers more than 800 programs, from an application built by Lexington, MA-based Makana that helps companies track incentive-based compensation for salespeople to one from Cambridge, MA-based Hubspot that helps marketers track the success of their campaigns.

Salesforce, according to a recent observation by Saul Hansell of the New York Times‘ Bits Blog, is on a path that “mirrors that of Facebook (and in some ways that of Yahoo and Google)…Both Salesforce and Facebook started out as rather handy Web-based services for keeping track of contacts. And both have realized that these lists of people, and the underlying technology to manage them, can be central to a lot of different problems that their customers may want to solve. So both are now turning into ‘platforms’ on which other companies can create and run a wide range of applications.”

That transformation hasn’t been totally hiccup-free: last week the Salesforce platform suffered an hour-long outage affecting more than half a million users. And several of companies I spoke with complained about a lack of technical support from AppExchange administrators, as well as alleged favoritism by Salesforce (there’s a perception that the company showers more attention on outside developers who direct larger numbers of users to the core Salesforce application). But in general, contributors to the AppExchange say creating Salesforce-compatible applications has widened their markets and solidified the appeal of their other products.

If you aren’t up to speed on CRM or Salesforce, a quick primer: CRM is the industry jargon for the category of software that most businesses today use to track their sales prospects; “a very fancy Rolodex” is Hansell’s apt thumbnail description. Companies like Siebel Systems, SAP, Oracle, and Peoplesoft have been selling PC- and server-based CRM packages since the 1980s. But beginning in 1999, and accelerating greatly since 2005 or so (when I first covered the company), Salesforce, led by ex-Oracle exec Marc Benioff, has been gleefully disrupting the CRM business with its subscription-based SaaS product, which stores clients’ sales database on “multi-tenant” servers. That means everyone’s data lives side-by-side on the same machines and is accessed by individual users via their Web browsers.

The Web is, by its nature, open, and a big part of the Web 2.0 revolution has been about building interfaces that allow applications to request data from one another and repackage it at will. So Benioff’s early decision to go the SaaS route meant that Salesforce could invite other companies to build software that talked with its database. That became especially useful when … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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  • http://sellsellsell.salesnexus.com Craig Klein

    I’ve spoken with many App Exchange developers who say being listed there has been meaningful from a marketing credibility perspective but, few actual sales opportunities have come via Salesforce.com.

    The user is often left in the middle trying to make Salesforce.com and the App Exchange provided software work and both sides pointing at the other when problems arise.

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