Salesforce.com, Partners, and Value-Added SaaS

As the resident Salesforce.com basher at ZDNet, it is with some smugness that I am watching the birth of a fellow naysayer on the future of Salesforce.
Written by Joshua Greenbaum, Contributor

As the resident Salesforce.com basher at ZDNet, it is with some smugness that I am watching the birth of a fellow naysayer on the future of Salesforce.com's efforts to break forth from its CRM on-demand origins into its next big thing. The new critic in the Salesforce.com-watcher camp belongs to Cowboy 2.0, and his post discusses how SFDC is changing the rules -- in the middle of the game -- for existing partners of Force.com, SFDC's attempt to build a platform to host third party SaaS add-ins to its CRM product.

We shall see if Cowboy has his facts 100 percent correct, though the scuttlebutt at this writing is that he has: SFDC is pulling the plug on a number of existing partners' efforts to build on Force.com, largely in an effort to protect SFDC's turf and stifle interesting new apps that don't fit the development model (ie. our way or the highway) of Force.com. It's obviously SFDC's prerogative to limit its PaaS play to whomever it likes, but closing the door on potentially worthwhile apps that are not built on native Force.com technology (the gist of Cowboy's problem with SFDC) is a move to limit the scope and influence of Force.com at a time when SFDC can't really afford more limits on something that is showing very limited results already.

The move looks either foolish or desperate, or both. It showcases one of the kinks in the future plans for SFDC that I've been harping on for some time: SFDC's AppExchange and Force.com, its two means for expanding beyond its rapidly commoditizing CRM base, are not happening, and have little prospect of becoming the next big play for SFDC. This basically means that SFDC won't be able to grow organically, and will either need to buy someone (Workday? NetSuite? Somebody?) or get bought (Google, IBM, Somebody else?) to provide some version of a future that coincides with the P-E ratio this company trades at.

Which leads me to a discussion of where the future of SaaS and On-demand is going, and why, so far, SFDC isn't heading there any time soon. The basics of my version of the future of SaaS is this: the next generation of SaaS vendors will be providing value-added services, based on the network effect that they can command as they aggregate data and processes from their customers and partner networks, that are simply impossible to provide on-premise for love nor money. It's the effect you can find at established companies like E2Open and GT Nexus, among others: a value-added collection of services and capabilities that derive from the ability of a SaaS vendor to leverage their network and the connections that network provides to do things that couldn't be done before. I've written a little more about this concept here.

This vision of value-added SaaS is in stark contrast to SFDC's -- and other's -- version of SaaS today, which is basically a lower-TCO, faster time-to-value replacement for on-premise functionality. So exciting ten years ago, so much yesterday's value-add in 2008 and beyond.

So, insofar as Cowboy's assertions have been largely confirmed by at least one source inside SFDC, here's what I see as the innovator's dilemma with respect to SFDC, which, one of its defenders just told me, is merely playing by accepted rules of the industry. If I'm a developer of a hot new app, I can use SFDC's Force.com and AppEx, and have what is a typically disadvantageous relationship with my platform vendor, who is, due to their own limited business model, unable to provide me either with a strong marketplace for my apps nor a vision of a value-added SaaS future that I can take to the bank.

Or, I can go with a major platform vendor, who is still going to provide me with a disadvantageous relationship, but will have the massive customer base and economic model that will mean real revenues from my efforts in the near term. And who might, just might, by virtue of their size and influence, provide some value-added SaaS roadmap that makes sense for me.

Sounds like a slam dunk to me.

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