Salesforce.com set to strike out with AppExchange?

Josh Greenbaum thinks that Salesforce.com is going to fail with its strategy of allowing software developers to use Salesforce.com as a platform to sell add-on components. Josh takes issue in particular with CEO Marc Benioff's analogy of AppExchange as the "eBay for enterprise applications" that will be "as easy as buying music on iTunes and playing it on your iPod."

Josh writes,

eBay is many things, but a secure and safe place to buy reliable products it isn’t...Even more significantly, as Marc most certainly knows, enterprise software is not like a three-minute song, however well-produced it may be, and an iPod is no enterprise software platform, however high-tech they now are.

Although Salesforce.com certainly has its work cut out for it, I think Josh is being a bit harsh. I agree that the eBay analogy is not the best, but no analogy is perfect. What Salesforce.com is attempting with AppExchange--allowing customers to build and share extensions on top of an on-demand offering--has never been done before. If this works, it breaks one of the major objections to software on-demand: the inability to customize and extend it.

But if AppExchange works, it would be a powerful example of how commercial software might be built and deployed in the future--sort of a combination of software on-demand and open source that is extremely scaleable.

My main concern at this point is whether there will be any sort of quality control over the extensions written for AppExchange. If the first apps deployed are junk, it will sour users toward the whole idea, and AppExchange might not recover. I suspect that Salesforce.com is aware of this problem and will be working hard to ensure that early adopters are satisfied.

Josh concludes,

Ironically, Marc is finding himself in the same situation that Tom Siebel found himself in: Too focused on standalone CRM functionality in a market that is increasingly interested in linking CRM to everything else in the enterprise. It was this requirement, Siebel acknowledged in his concession speech, that prompted his retreat from the field and into the arms of his rival, Oracle. And this is a requirement that Salesforce.com has even less ability to meet than Siebel did.

I don't agree that Salesforce.com is another Siebel. Yes, both are focused on standalone CRM functionality. But Siebel was competing with Oracle and SAP on the same turf--big deals for traditional license sales. As SAP and Oracle filled out their CRM functionality, Siebel was unable to compete effectively. Its functionality might still be marginally better, but it didn't make up for the need to integrate it with the rest of the enterprise.

Salesforce.com, for the most part, is competing on different turf. It offers an a low-cost, quick-to-implement, alternative to the traditional license model of SAP and Oracle. For small or mid-sized firms, or for large companies that have two to three years of projects backed up in their IT department, it's an attractive alternative.

It's too early to say whether Salesforce.com will be successful with its AppExchange program. But at least it has a strategy.

Computerworld has a summary of AppExchange.

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