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Salesforce.com's application marketplace 'will expand CRM'

The AppExchange platform will allow companies running Salesforce to get access to new applications, but analysts don't think it will tempt Oracle users to defect

Salesforce.com's AppExchange platform could have a long-ranging impact in expanding the total addressable CRM market, rather than divert revenue from competitors such as Microsoft, Oracle and SAP, predicts an IDC analyst.

"The total CRM market is very diverse and complex, and IDC believes that the Salesforce.com model of selling applications will not be for all customers," Bo Lykkegaard, programme manager at IDC's European enterprise application group, said in an email interview.

"The key impact will be about an expansion of the total addressable market [encompassing] enterprise applications, [rather] than a dollar-for-dollar shift of revenue from current competitors toward Salesforce.com and its ecosystem partners," he said.

Salesforce.com launched its much-hyped platform at a conference in Singapore last week, about a month after its debut in the United States. AppExchange is an online marketplace that allows developers and Salesforce.com customers and software partners such as Adobe, Business Objects, Factiva and iAnywhere, to distribute their applications via Salesforce's hosted-computing platform.

Addressing an audience that included customers and partners, John Freeland, president of Salesforce.com's worldwide operations, said: "Windows started out as the killer application and became a platform — that is our vision [for AppExchange]."

Lykkegaard noted that Salesforce.com is positioning AppExchange as a product that offers sufficient attractive applications so that customers are willing to pay a fee for the platform, even if they may not be traditional Salesforce.com CRM application users.

"Selling its applications on top of other application is becoming the way to generate revenue for the likes of Skype, Business Objects and Adobe," he said.

Lykkegaard added that another key opportunity for Salesforce.com will lie in its ability to serve small-scale customers on a profitable revenue model — the same ability that has enabled Amazon.com, eBay and Google to create new markets, and grow explosively.

About 18,700 customers and 351,000 subscribers including Cisco, Merrill Lynch, Symantec and Singapore's postal services provider SingPost, currently use AppExchange.

Salesforce.com's Asia-Pacific president and chief executive, Steve Russell, declined to reveal the company's subscriber base in the Asia-Pacific region ahead of its earnings release on Wednesday.

Currently, Salesforce.com does not charge its partners any commission on the sale of applications that run through AppExchange. Russell declined to say if this arrangement could change in the future.

"Our focus is still on CRM, and service and support," he said. "[In terms of monetising subscriptions], we don't know where AppExchange is going to go [yet]."

IDC's Lykkegaard however, believes AppExchange is "critical" for Salesforce.com to secure the growth of its application platform revenues. The analyst predicted that it is unlikely that Salesforce will start charging partners a fee for distributing applications on the platform.

Lykkegaard said: "If Salesforce.com tries to charge significant fees for partners selling through AppExchange, they would risk jeopardising their most important revenue stream — the Salesforce.com platform licence, which is required for [subscribers to implement] all partner apps."

"Instead, they will use significant resources in helping partners migrate applications to the Salesforce.com platform, and market and sell [these] applications," he said.