Salesforce.com's Koral buy changes the game

Salesforce.com's Koral buy changes the game

Summary: Buying Koral brings Salesforce.com squarely into the hot and hotly-contested collaboration sector, up against some heavyweight competitors and with some intriguing Office 2.0 roadmap options. But it puts a worrying question mark over the vendor's ecosystem strategy.

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TOPICS: Salesforce.com
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Thank you Salesforce.com. Your acquisition of AppExchange partner Koral will certainly liven up the keynote discussion I'll be moderating at next week's SaaScon show in Santa Clara, CA, entitled Understanding SaaS Platforms and Ecosystems. I'm sure panelist Rene Bonvanie, general manager of AppExchange and developer relations will face some challenging questions about the thrust of Salesforce.com's ecosystem strategy. There'll be a good spectrum of views from NetSuite, Apprenda and Jamcracker sharing the panel, and in the interests of disclosure I should note one of my clients, WebEx, is also pursuing a SaaS platform and ecosystem strategy (see disclosure page).

But the Koral acquisition (image below courtesy of the Koral blog) not only changes the game from an ecosystem perspective. It brings Salesforce.com firmly into the collaborative application sphere, putting it directly into competition not just with WebEx but also Microsoft's Sharepoint platform, IBM's Workplace and, as Nick Carr has pointed out, Google's enterprise division and the Google Apps portfolio. 

Koral is now part of salesforce.com banner

There was a hint of this shift last month when Salesforce.com announced the addition of AppSpace, a customer collaboration portal, to its Spring '07 release. At the time I described this as the Socialization of CRM, but it was also an implicit acknowledgement that collaboration is an application category that subsumes and surrounds point solutions such as salesforce automation and customer service automation.

Further confirmation of the strategic importance of collaboration was to come within the ensuing few days. Microsoft's CEO Steve Ballmer called Sharepoint "the definitive OS or platform for the middle tier," followed by Cisco's acquisition of WebEx, which led Tim O'Reilly to describe collaboration suites as "the next generation of must-have enterprise software." Behind the scenes, Salesforce.com was already ahead of the game, because as we now know, it had already completed the Koral acquisition.

That's game-changing for Salesforce.com because collaboration is becoming the largest and fastest-growing segment of the SaaS sector — faster even than Salesforce.com's own CRM segment — and with a much larger potential reach, because it touches every employee in an organization rather than being restricted to specific departmental roles. Becoming a content management player adds a completely new and much larger opportunity than Salesforce.com's existing CRM market, brings it into direct competition with some heavyweight players (TechCrunch lists them) and, suggests Ismael Ghalimi, opens out an intriguing roadmap into Office 2.0 territory.

But it's also game-changing — in a potentially negative sense — for Salesforce.com's ecosystem aspirations. This acquisition treads firmly on the turf of some of the vendor's existing partners in a much more blatant way than previous acquisitions such as Keiden and Sendia have done. Via email, I asked Central Desktop's CEO Isaac Garcia for his take on the news (I previously wrote about how Central Desktop's collaborative environment works with Salesforce.com in January). While he made hay from the Apex Content platform elements of the announcement — "I'm afraid that Salesforce.com and its strategy are starting to leave the SMB and mid-markets behind while they put their eye on the enterprise market ... Developing and configuring applications on a platform sounds nice, but is a bit much for most SMBs to bite off and digest" — he also expressed a sentiment that will resonate with many AppExchange partners this week:

"When you're in AppExchange you're dancing with the elephant. If they find an attractive category, they will either buy a company or build that part of their application out. Salesforce.com needs to tread lightly if they want to build an active and motivated partner community. Of course it's their right to do whatever they want, but conflict is inevitable and they need to be very cognizant of this."

Falling under the elephant's feet is another risk to factor into the calculations a vendor makes when deciding whether to invest in participating in an ecosystem. AppExchange partners will bear that risk if they believe the ecosystem is delivering the sales and marketing benefits they expect. But that's not yet a foregone conclusion, and my take is that the Koral acquisition puts Salesforce.com's ecosystem strategy firmly on probation for many partners and potential partners. I'll look forward to putting that thesis to the test — as well as looking at the whole notion of Web-based SaaS platforms and ecosystems — in the panel debate at SaaScon next week.

Topic: Salesforce.com

Phil Wainewright

About Phil Wainewright

Since 1998, Phil Wainewright has been a thought leader in cloud computing as a blogger, analyst and consultant.

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