Benioff: AppExchange is our second killer app

I had a chance yesterday to catch up with Salesforce.com CEO Marc Benioff, who stopped off in London for the European launch today of Salesforce Winter 06 and the AppExchange, before heading off to Davos for the World Economic Forum this weekend.

We talked about a range of issues that I'll be writing up over the next several days, including the rise of on-demand, social production of applications, corporate philanthropy and other topics of interest. But we started off with a question I've been pondering since I wrote about last week's release of AppExchange: exactly how important is it to the company's long-term strategy? Benioff started off by reiterating the importance of the company's flagship salesforce automation application, but he made clear that he sees enormous potential in AppExchange:

"I think we have a killer app with Salesforce today, and it’s a proven killer app. People love this application," Benioff told me. "But we’ve a second killer app. I really believe — even though it’s not proven and not out there yet — that AppExchange is this killer app. A lot of companies come along and say, ‘Yes, you’re a one-product company, but can you have a second product?’ I think AppExchange really is the second product.

"That’s how I think about AppExchange. Even though [we're introducing it because] it makes Salesforce better, I think AppExchange [in its own right] is our second killer app."

This is even though at this stage in its lifecycle, it's not 100% clear exactly what is the killer app that AppExchange delivers. In my posting last week, I talked about the potential uses simply for application discovery and sharing. Benioff has talked of making it as easy to create and publish applications as it is to write and publish blogs. We'll have to see how customers actually start using AppExchange in reality before drawing any substantive conclusions about how this will play out. But if customers do start to deploy AppExchange as a platform for composite applications — enterprise mashups — then it has the potential to take Salesforce.com into a much bigger market than its current CRM niche.

Benioff illustrated the extent of that market. He cited ADP, the company's biggest implementation to date, with 6,700 salesforce users, but a total of 26,000 employees. Only a subset of those employees can ever be target users of CRM products, but they can all be target users of AppExchange. Salesforce still holds the potential to dominate the CRM market, but AppExchange could hold the potential to dominate the entire on-demand applications market.