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By | Gavin Clarke 19th January 2006 10:37

Salesforce.com places top-down bets on AppExchange ISVs

More interventionist

Salesforce.com is planning to actively target large ISVs, especially those serving certain verticals, to expand AppExchange and increase the service's enterprise focus.

John Freeland, Salesfore.com's recently appointed president of worldwide operations, told The Register that the company planned to make "some top down bets" and focus on key industries with partners.

Salesforce.com will also lobby big software companies that provide traditional enterprise-class functionality to join AppExchange.

Freeland did not provide details about which ISVs Salesforce.com will target, but listed health, manufacturing, the public sector and financial services as the top four vertical sector priorities.

AppExchange is the hosted CRM provider's attempt to establish a marketplace for enterprise applications. The market provides a venue for developers to post their software that can then be searched, downloaded and paid for by the end user. Applications also integrate with the Salesforce.com interface and customer data stored in Salesforce.com's systems.

Salesforce.com's chief executive, Marc Benioff, described AppExchange as being the "iTunes for enterprise software", where business software could be posted, searched and downloaded as easily as music is on Apple's iTunes.

While AppExchange already boasts a large list of applications - from Adobe Systems, Factiva and a host of lesser knowns - AppExchange is lacking any offerings from the big-name ISVs who are more typically associated with enterprise use - these include Microsoft, PeopleSoft, Oracle, Siebel and SAP.

Unfortunately for Salesforce.com, while these companies are invariably competitors, it is also important they are made available through AppExchange and integrate with Salesforce.com for Salesforce.com to continue its growth in the enterprise.

Salesforce.com has, until recently, been lacking enterprise-level deployments, a fact Benioff must have been aware of, as, this week, he added ADP, Cisco Systems, Symantec and Sprint/Nextel to a customer list that also includes Merrill Lynch.

Until now, Salesforce.com appears to have taken a laissez-faire approach to partnering, allowing ISVs to realize the benefits themselves of targeting Salesforce.com's subscriber base.

Freeland recognizes the value of this strategy, but says Salesforce.com must also adopt a more interventionist approach. "We are going to have a ground-up approach similar to today's approach of '1,000 flowers blooming' where it's hard to predict where the innovation will come from," he said. "[But] we will also have some top down bets... that will prime the pump of bringing together the right vertical ISVs with the right charter companies... to build AppExchange."

The "charter company" strategy is an approach used by Freeland's previous employer, Accenture - where Freeland was managing partner for Accenture's CRM business. The "charter" approach sees an ISV build as a so-called solution for a specific end-user rather than pro-actively building software for sale off the shelf.

It is through this strategy, and during the courtship of enterprise ISVs, that Salesforce.com apparently plans to target its four chosen vertical sectors. "You will see us focus on some key industries," Freeland said.

Of course, AppExchange is a hosted service and ISVs will have questions about whether making their software available as a service means they must change their architecture from client/server. The answer seems to be a "maybe".

Freeland says ISVs that don't want to re-write code can "take a composite approach", of having a thin, web-enabled layer running in AppExchange with the rest of the data and application logic hosted on a back-end server. One option is to develop a hosted version of the existing suite, as Business Objects plans.

As for SAP, Oracle and Microsoft, Salesforce.com can expect resistance - or at least reticence - to joining AppExchange and integrating with Salesforce.com. Freeland believes that integrators, like current Salesforce.com partner Tata Consultancy Services, could help sidestep this by building plug-ins to the competitor's software for customers that would be made available through AppExchange.

"Customers' [demand] will ultimately drag ERP providers to the table," Freeland predicted.®

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