Salesforce outsources application development
Today's launch of Apex, a new on-demand development platform that runs on its own multitenant infrastructure, is a daring move by Salesforce.com to sustain its breakneck growth by outsourcing future applications development to its partner and customer ecosystem.
In the race to establish AppExchange as the operating system for the Business Web, Salesforce.com needs to extend its enterprise application footprint far faster than it can by internal development alone. Outsourcing future application innovation to outsiders may sound like an odd thing for an enterprise applications vendor to do, but of course Salesforce.com is no ordinary applications vendor. In fact, examining the detail of the Apex project demonstrates how extraordinary this company is.
Salesforce.com has set out to accelerate the expansion of the Apex ecosystem at a record-breaking pace.The stand-out moment for me was Accenture's CSO saying the packaged software model was broken The conventional licensed software market hasn't seen anything like this. In planning its ecosystem strategy, Salesforce.com has looked to antecedents from the Internet era, most notably eBay, whose former COO announced today that he has joined the Salesforce.com company board, and also from the open-source movement, particularly the use of the Web to share ideas and product roadmaps. Any successful ecosystem depends on a snowballing virtuous cycle of an expanding customer base that draws in developers, whose innovation brings in more customers, which in turn reels in another wave of developers. Everything about the launch of Apex is carefully designed to accelerate the gathering momentum of the ecosystem, in three key areas:
Developers and entrepreneurs. To pump-prime a steady flow of innovation, Salesforce.com is establishing dedicated incubators for Apex developers with a rent-a-cubicle model (the first of them cheekily in Siebel's former headquarters overlooking the busy US-101 and CA-92 intersection in Silicon Valley). At the same time, company CEO Marc Benioff isn't shy of boasting how much venture capital is being invested in AppExchange partners (slyly implying that the investment is directly linked to AppExchange): "We're forecasting a billion dollars [of VC finance] invested into the AppExchange over the next year," he bluntly stated in his keynote today. The company is just as conscious of the need to direct developers towards the areas of product development where customer demand is highest. The recently launched ideaexchange exists in order to publicize and rank customer requests so that developers know what to innovate — effectively externalizing the company's customer feedback loop.
Customers. Customers are an important part of this ecosystem too, because the AppExchange model allows them to publish their own services if they wish to. Although many will want to keep those private, others may find a benefit from collaborating with the wider user community to improve and enhance those services, just like in the open-source model. Even if they choose not to do that, however, Salesforce.com will still be monitoring their creations and most probably incorporating those that it likes into its own future development plans or channeling suggestions to loyal developers.
Integrators. The stand-out moment for me in this morning's keynote session was seeing Accenture's chief strategy officer Bob Suh come out on stage and say how the packaged software model was broken. One of Salesforce.com's most serious challenges in breaking into the enterprise software market has been working out how to get Accenture and its peers on board. Well of course Accenture is interested now that Apex allows its consultants to customize the application to their heart's content. It's still not as good as camping out in the customer's car park for years at a time to implement Oracle or SAP, but like all its competitors, Accenture knows that the writing is on the wall for that kind of engagement and has just been waiting for the right moment to make the jump. "From our perspective, this is a major milestone," said Suh. "We believe this on-demand services milestone is perhaps bigger than anything before." He went on to liken it to the advent of prepared meals in the food market, which, he noted, "doubled margins for distributors" — a hint that ISVs and SIs should expect a similar profit boost in the on-demand ecosystem.