RealTime IT News

Salesforce Banking on The 'Long Tail'

NEW YORK -- Salesforce.com  CEO Marc Benioff today articulated the company's new platform strategy at a press and partner event here, and stressed Google is more of a friend than foe in the software market.

Benioff also officially introduced a new wealth management edition (WME) application developed specifically for the financial services market, and explained how this product fits into the company's platform strategy.

As reported yesterday by internetnews.com, the WME builds on the company's flagship customer relationship management (CRM) application, SFA.

WME, which will be available in the third quarter of 2007, combines features of SFA with news feeds from Dow Jones and real-time quotes and bid/ask data from Thomson Financial and Okere. It lets financial advisors automatically match news items and stock quotations to their customers' portfolios and interests.

WME represents the first time that Salesforce.com has customized its CRM application for a single vertical market, but Benioff said it will not be the last.

"Where we don't see action, we will create action," he said.

In the past, Salesforce.com contented itself with providing a basic CRM application and an ecosystem of ISVs, developers and developer tools to complement that offering.

That ecosystem includes an application marketplace called AppExchange, the Apex programming language enabling new applications in its ecosystem, and most recently AppStore, a sort of iTunes store for business tools enabling partners to sell applications developing using the platform and Apex language.

Developers can use the platform to build new applications and find new customers, while Salesforce.com creates a walled garden with which to hold onto its customers.

Benioff said that this ecosystem, which he dubbed Salesforce.com 2.0, will become as integral to the company's success as its flagship CRM application.

He added that SFA and AppExchange should be considered as two separate businesses.

"AppStore is [our] monetization strategy for the platform. We want to get the ISVs to build on our platform and execute on that," said Benioff.

But questions have been raised about how the company can continue to satisfy its partners while developing this second prong to its business.

As Salesforce.com begins building vertical applications, it risks competing with the very vendors that are populating its AppExchange.

Benioff agreed that the company won't hesitate to compete with its partners, but argued that the AppExchange will nonetheless attract vendors because it lowers their barriers to entry.

He noted that the AppExchange platform is the fruit of eight years and more than $75 million worth of investment that can provide developers with networking, storage, databases and application servers. The idea is that those vendors "can become the next Salesforce.com," he said.

Jeff Kaplan, managing director of SaaS consulting firm THINKstrategies, noted that Salesforce.com is taking a "long-tail approach" by generating revenues from an increasing number of vendors on the AppExchange.

Even if each individual vendor only generates a modest amount of revenue, they create incremental income for Salesforce.com while making the overall platform more attractive to a larger number of potential customers.

Salesforce.com didn't just stumble onto the idea of going after the financial services market first.

According to Geoff Merrick chief architect with Okere, the company reacted when it saw "Google was coming out with free market data."

Gartner analyst Ben Pring said this is an example of Salesforce.com reacting quickly to perceived threats.

While in the past, Salesforce.com worried about competition from on-premise software vendors like SAP  and Microsoft , it is now "very focused on developments from below like the consumer web and open source."

However, Benioff said consumer web companies in general, and Google  in particular, are good partners and dismissed the idea that he viewed them as a threat.

"if the enemy of my enemy is my friend, then Google is my very best friend," he told internetnews.com.

However, vendors on the AppExchange vendors will not all benefit to the same extent, some because they will be overshadowed by the Salesforce.com name, and others because Salesforce.com may take away some of their business.

Merrick of Okere said that working as an AppExchange partner is "not easy."

He also said his company views being on the AppExchange as a way of developing name recognition rather than as a source of revenue.