I’ve heard a lot about Saleforce.com’s new AppExchange platform lately, both at conferences and in the technology press. The buzz around this platform is building and it seems that Salesforce.com has positioned itself very well to succeed as a conduit for on-demand business applications. If AppExchange can capture the attention of Independent Software Vendors (ISVs) and win mindshare among the developer community, it could certainly be a big strategic move for the company. With over 250 applications and a bevy of software vendors offering their wares on the AppExchange platform, it would seem that Salesforce.com’s next big bet is off to a good start.

A majority of the on-demand applications available through AppExchange focus on niche sales, marketing, finance, and HR business activities. Rather than buying one monolithic software system from a single vendor and hiring a brigade of consultants to customize it, Salesforce.com is hoping that many companies will opt to bet on an underlying platform and purchase integrated on-demand applications to perform very specific functions. Developers working for ISVs can tailor their once standalone products to integrate fully with Salesforce.com, hopefully without losing their own unique and rich feature set. ISVs enjoy several incentives to sign-up for AppExchange, including free developer accounts, hosting resources, an instant market of potential buyers, 100% revenue rights, and community feedback. AppExchange is billed as a whole new marketplace for existing (and new) Salesforce.com customers who gain derivative value from this new distributed application model. 

While some vendors pay lip-service to AppExchange integration, I’ve been impressed by a handful of its tightly integrated software services. Personally, I would never have discovered several promising new companies without seeing their on-demand services on AppExchange. For example, Kieden offers a clever service for any company running paid search campaigns with Google. Kieden correlates clicks on your ads as they turn into leads within Salesforce.com, creating dashboards that track which ads are generating meaningful sales results. Most companies today are investing in paid search, so why not use a software service that quantifies the return on investment directly within your CRM system?

Similarly, VerticalResponse is a San Francisco company that offers targeted email and direct mail campaigns that allow companies to communicate with their leads and prospects, tracking and reporting on all these outreach activities within Salesforce.com. There are no setup or deployment fees with VerticalResponse - it simply charges customers on a pay-as-you-go model, with volume discounts based on the number of emails sent each month. Integration with your customer and lead data in Salesforce.com simply makes the value proposition more compelling. With 500 free emails at sign-up and no setup costs, there’s little risk associated with using a software service like VerticalResponse. For the skeptical buyers amongst us, AppExchange offers some pretty honest feedback and a five star rating system from the user community.

It’s far too early to say whether an on-demand application platform like AppExchange will change the marketplace for software. It’s certainly a clever strategy for Salesforce.com to expand their existing subscriber base of 350,000 users by supporting a large partner ecosystem on AppExchange. Microsoft can testify to the exceptional value of a vibrant and diverse partner ecosystem, which continues to drive adoption of the .NET platform and associated software revenue for the company. It will be interesting to see if Microsoft has any similar “partner platform” announcements up its sleeve for the annual Worldwide Partner Conference in Boston from July 11 - 13th.

Perhaps AppExchange will change the way applications are developed and deployed across the industry. Clearly the partner model provides a depth and breadth of integrated applications that is hard to ignore - but let’s not jump too far ahead. At the end of the day, it will be the mindshare of the developer community and committed ISVs that make AppExchange sink or swim. There’s nothing new about that picture…

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