Will Appexchange scale?

Another great post, this one by Brooks Jordan, titled Navigating the AppExchange, from SortAnalytics.

The larger question about the AppExchange, of course, is if it's not an open system like EBay ("the EBay for the business Web"), will it scale? Or will the desire to have quality apps create too much friction? I think what Salesforce.com needs to do is keep the quality and security threshold relatively high, but keep tweaking the certification process until it's one third as complex. Then, they can drop the certification fee in favor of a small percentage of the transaction between buyer and seller (like EBay), and they'll have a platform that's got the goods but is flexible enough to accomodate diversity. And I think that's what they'll do.

Check out this handy little application that Jordan and his group published on the Appexchange, called: Web Feeds from Attensa Connect. It sets up for you RSS feeds for your leads and contacts! Cool! Can't wait to try it.

The Appexchange Long Tail....

Great post from Gareth Davies' Where's the upside blog, where he discusses the long tail aspect of the Appexchange.

Here's an excerpt:

On the one hand this is a great way for established companies (such as Business Objects) to distribute tools and services that interoperate with Salesforce.com. This is classic synergy (1+1=3) stuff. Good for both companies and great for customers. On the other hand this is about long-tail economics, about getting unlimited listings of rarely sold items that are "exactly" what the customer is looking for.

Then he proposes the following:

Instead of a layered bronze, sliver and gold partner model I would propose that there is a distict seperation between "major players" and "minor players". Major being well capitalised and highly consistent high-quality applications while Minor consists of the bootstrappers and innovators, where quality is more variable (due to automated listings) but where new and innovative solutions can be tested with little capital overhead.

I agree with both the observation and the prescription. What I would add is that the current big flaw is the assumption that the passive Appexchange marketplace is adequate as a vehicle for educating salesforce.com about what is taking place. Dreamforce and city tours touch only a tiny portion of salesforce.com clients. There needs to be a more systematic way to enable salesforce.com customers to really know what Appexchange offers them.

What do the AEs and SEs really think?

How many of you Appexchange partners out there were contacted by a salesforce.com Account Executives or Sales Engineers just days after your Appexchange solution was published? We were, and when we were, we were extatic! But since then I have come to suspect that the salesforce.com team is explicitely tasked to reach out systematically and connect with partners who publish, and get them all excited with the prospect of connecting them with actual, tantalizingly real, flesh-and-blood clients, and then, once in a while, dangle something like a vague opportunity in front of them, just to keep them excited.... But so far, even though we have talked many times about clients who would be "very interested", they have not come through for us.

In any case, here is a question I have for the salesforce.com AEs and SEs. Do you think that this Appexchange thing is one big pain in the ass that you have to put up with while you take care of your bread and butter business of closing real deals, or do you genuinely subscribe to your CEO's mission? Not expecting many honest responses, but just in case you are nodding, I am sure you are not alone!

Benioff's $100 million claim about Appexchange....

Here is something interesting I came across at the Vendorprisey blog:

…24% of all listed applications were built by Salesforce.com rather than by partner vendors
…that 6 out of the 8 (that’s right, 75%) “Most Popular” applications are apps built by Salesforce.com and that are free.
…many of these apps extend the Salesforce.com main application functionality in ways that would traditionally classify the said “app” as a “plug-in” (Seriously, would anyone classify Clippyor the Microsoft Equation Editor as applications, or analogously would you buy a “song” on iTunes that was a Snare Drum Loop?)

Another interesting article, this one by Josh Greenbaum at ZDNet, echoes the same sentiments:

So I asked Marc [Benioff], first privately, and then in a Q&A session with industry analysts, what the total revenues of the AppExchange marketplace were. His first comment was straightforward: $100 million so far this year. Not bad for a marketplace barely a year old. I then asked him to break that down in some way in order to reflect an average revenue per partner, a top ten revenue winners — anything that could put a little color into the number. Not possible, Marc said, but I could go to the AppExchange web site and see a "most popular" list that would give me some indication of the relative breakdown of that $100 million prize. One in particular, Hoovers, had made $3 million so far, Marc claimed. Armed with those data points, it seemed like a little analysis could give us some interesting viewpoints on AppExchange's success, and, assuming it was as good as Marc claimed, bolster his contention that he can "destroy" his much larger, more established competitors. Sounded like a plan.

But in the Q&A, things got a little less clear. It turns out that the $100 million number was an estimate for the entire year, based on a survey of partners. But there was still the "most popular" list, and… next question, please.

Certification fees....

Back in the barracks -- long trip back home. Very glad the circus show is over! It was exciting, though. Many leads and interesting conversations, but let's ses how they convert. Important tid bit to share with you is that salesforce.com is revamping the certification program. There will still be a fee, but it will be "nominal". What that means, Mike Kreadon, who was presenting the roadmap for the Appexchange Winter release (slated for December), could only say that it would vary from partner to partner....

The new fee structure is set to kick on January 17, 2007 -- the one-year anniversary of Appexchange.

Fisher and Brooks at it!

Those of us who attended the Developers Partners Summit session this afternoon at Dreamforce witnessed a bizarre public clash between David Brooks, product manager for Appexchange, and Steve Fisher, Senior VP, Platform. The spat, which lasted a good couple of minutes, was over plans -- or plans of plans -- to have salesforce.com handle billing for Appexchange solutions on behalf of partners. Brooks made it sound like it was a done deal and the whole offering was imminent, to which Fisher responsed with, "we are not committing to doing it, this is still up for discussion, we are not committing to any time lines," etc. The man sounded angry and irritated. It was pretty cool, though, to watch some reality seep out -- a refreshing departure from the usual, "look at us, we are gods...."

On-line survey: sound off!

Spoke to a few partners and got a better sense of what other partners feel about the Appexchange. No surprises: happy to be part of the enterprise, but they all grumbled, some louder than others.

I will be reaching out to other partners over the next couple of weeks to get a lot more feedback from people. In the meantime, I've set up an on-line survey to get people rolling with their feedback. Check it out on the side bar.

Surveying partners

A few hours remaining until closing time at Dreamforce. Tomorrow, Wednesday, I will spend the morning making the rounds chatting with exhibitors and checking the pulse of their satisfaction with Appexchange. So far, the handful I have spoken with have expressed quiet disappointment, but tomorrow, I intend to be far more systematic and will sample a larger number. And when I go back home, I intend to carry out as comprehensive a survey of partners who have published on the Appexchange as possible.... So, stay tuned.

And by the way, I do appreciate the fact that salesforce.com is mandating that their AEs, SEs, and Partner Success managers make the rounds and check on partners. I spoke to 8 of such since our booth opened. But let's get real: is an expo. floor really the place for honest, candid, no-nonsense conversations about "How have things been going for you" to take place? When a salesforce.com rep. asks me, "How have things been going for you?" I hear, "isn't it great, you lucky dog, that you are exhibiting here?"

But -- let me not be all negative here. I have had some great conversations -- mainly with other partners, but with some customers as well -- and I intend to have more of those tomorrow. Will keep you posted on the survey and my findings as I collect more empirical data.

Let me count the ways....

A quick post. Here is a top ten list of the many ways that partners are giving to salesforce.com, for very little in return (at least for a large majority of the partners) from salesforce.com:

1. Precious development cycles.
2. Precious marketing resources.
3. $10,000 for "certification" per application -- I scare-quote because if you have gone through one of those, you can quickly tell that it's the dollars they are after and not the certification itself.
4. Some more thousands of dollars for more prominent listing in the Appexchange.
5. $15,000 or more for exhibiting at Dreamforce and more thousands of dollars for exhibiting in the city tours.
6. $20,000 for a cube if the partner wants to join salesforce.com's "incubator" program.
7. Differentiation: new customers may decide to go with salesforce.com as opposed to some other CRM solution because of a particular Appexchange solution.
8. Stickiness: as they use more Appexchange applications, salesforce.com clients will be less inclined to jump ship.
9. An active R&D unit pumping out otherwise very expensive data about what customers want and therefore what solutions to pursue.
10. The ability for salesforce.com to claim that it is doing something revolutionary. Or, in other words, making it possible for Benioff to go to sleep every night with a big, satisfied grin on his face as he drifts into dreams about slaying Microsoft and company. You just can't put a dollar amount against that -- can you!

Let me know if I have left out any other ways Appexchange partners are benefiting salesforce.com's bottom line. But having listed the ten above, I am more miffed than ever.....

Notes from the Dreamforce Underground!

Writing from the very eye of the Dreamforce storm. Not much to say at this point except that I am both exhilirated by the energy level at this conference and the connections we are making with prospects, and irritated by the loud sloganeering about how salesforce.com is leading a "movement" and a "revolution".... I respect salesforce.com for its success, but they really ought to tone down the idealism-talk. People attending Dreamforce really don't deserve to be patronized with talk that makes its sound as if salesforce.com is engaged in something bigger than the bottom line -- especially when the CEO ends his keynote address by pointing out that people can get one free license to the newly released PRM offering if they were to buy two licenses ( and it is a limited offer, so hurry....).

Got a couple of interesting comments that I want to highlight. One from Mark Mangano of SalesforceWatch.com, who posted a link to a salesforce.com PDF that details one of the many, many ways that a partner can part with his money in the hope of getting something out of Appexchange. This particular way really, really bugs me because it exploits the very fact that enables salesforce.com to declare Appexchange to be the huge success that it claims it is: the size of the directory! Since there are 400+ applications in the directory, salesforce.com charges partners money for them to gain better placement in the listing of the applications. And we are not talking coins here. Sponsoring the main category in Service and Support will run you $10,000 per querter! The Marketing category will run you $8,000, etc.

So, given a mediocre application with big marketing money behind it and a truly revolutionary application with little marketing behind it, which of the two would rise to the top?

That's no way to build a nation, guys!

The other comment I wanted to mention was from Kingsley "the Successforce.com guy", who took time off his busy schedule I am sure to tell me this:

If you're at Dreamforce this year, you'll find out about a new and less expensive way to access our market as well as marketing expertise.

Pretty cheeky, I'd say, that you would use my blog to advertise yet new and nimble ways to charge your partners, when I am telling you how sore I am (among others) about having to spend so much money for so little return while listening to your CEO beat his chest about how 400 applications were built by "amazing partners" that he "really, really appreciates", and so forth!

Making money through the Appexchange

Just wanted to highlight a couple of paragraphs from David Claiborne's comment on my post yesterday:

Getting access to the half-million salesforce.com users makes AppExchange an attractive development target, but it is very difficult, as Gareth Davies noted, to get an actual sale from the AppExchange channel. As noted in this blog, salesforce.com demands a VERY STEEP price for access to its customer base via Dreamforce and other events.

My conclusion is that unless you have a $100,000 marketing budget for the first year, you will probably not see any return from an AppExchange product (unless you can sell your product/intellectual property to salesforce.com).

My impression, given that we have indeed spent close to $100,000 in cash with salesforce.com and probably as much in development and other marketing activities, Claiborne's assessment is right on the money....

I am not alone!

So exhilirating to discover that I am not the only salesforce.com Appexchange partner who is a tad bit unhappy about how salesforce.com is semi-exploiting its partners via the Appexchange. Check out Gareth Davies blog: Where's the Upsitde? -- "A view from an technology entrepreneur and salesforce.com partner. Hard core technology, tech and code - all about Salesforce.com." Check out especially this blog post: Salesforce.com Eating its children

Here is a refreshing quote:

Salesforce.com should focus on helping partners [become] successful not charging them an arm and a leg to get them on the platform. This is an area where [M]icrosoft excel, if Salesforce.com want to gain SMB customers without a huge cost of sales, they had better start looking after their partners... or they may give up and go with Microsoft.

Amen!

Is Appexchange a racket?

Well, we are about 48 hours to salesforce.com's Dreamforce event and I am getting ready to head out to San Francisco for the big four-day bash event! Rumors are flying around that there will be some big-bang announcements, but what else can you expect from a company run by an over-inflated ego like Benioff?

I attended last year's Dreamforce and about half a dozen other salesforce.com events since then, and the one constant I can reliably point to is that they are getting cockier and cockier over at Benioff land. Good for them, except that in the process, they are making a good number of their Appexchange partners bitter. I know I am bitter! Compared to the amount work we have had to put in, what we have gotten from the Appexchange is jack-doodoo. Ok, so we bust our ass building cool applications, we integrate with salesforce.com, we pour some good dollars to make our offerings top notch, but when it comes to getting the application in front of salesforce.com clients -- "well, whoa!" says salesforce. You need to participate in this event that will run you 10 grand, or subscribe to this service that will cost you 3 grand, or you need to get freaking "certified", which will run you another 10 grand, and so on....

In a nutshell, Appexchange is turning into a direct revenue source for salesforce.com -- not a platform where the future is headed, as Benioff likes to claim, but something of a racket, where salesforce.com bilks its leads-hungry partners and dupes them into pouring good, hard-earned money after good, hard-earned money into what so far, for most of the Appexchange partners, is a big resource sinkhole.

Anyway, I am headed to the circus, but this time with a twitching nose. Those of you out there who have published on the Appexchange, feel free to share your thoughts and feelings. Am I in the minority? I am overly bitter?

And please, if you are from salesforce.com, please stay away from commenting.