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Salesforce Serves Notice

By Michael Hickins     Feedback

The on-demand CRM leader caters to its ecosystem a week after SAP does the same for NetWeaver.

Courtesy of Internetnews.com.

Salesforce.com may not have deep enough pockets to get into the venture capital business the way rival SAP did last week, but it has found a way to leverage venture capital indirectly on its behalf.

The provider of on-demand customer relationship management (CRM) software today announced AppExchange OEM Edition, a way for independent software vendors (ISVs) to build custom applications off its AppExchange platform at very low cost.

The moves comes a week after SAP created a $125 million venture fund to finance the development of new applications built on its NetWeaver platform.

Kendall Collins, vice president for product marketing at Salesforce.com, said that AppExchange OEM Edition has already drawn large numbers of new and established ISVs to its ecosystem without having to dangle a huge financial carrot.

AppExchange OEM Edition provides ISVs an on-demand platform license that allows vendors to build and deliver their own branded on-demand applications.

For $25 per user per month, OEMs (define)  can create up to 5 custom tabs for their applications under the common AppExchange user interface, and 50 database objects. They also have access to the AppExchange API.

This is a departure from the older AppExchange model, in which vendors were charged $75 per user per month, meaning they have to charge end users upwards of $100 per user in order to generate healthy margins.

Sheryl Kingstone, an analyst with Yankee Group, told internetnews.com that because the ISVs were being charged just $25, they would be able to offer end users lower price points while maintaining healthy margins.

But Kingstone believes that AppExchange OEM edition is about more than simply creating extra revenue. The very weight of its footprint seems enough to cause money to flow toward its partners.

She noted that Remend is one of several start-ups that landed venture financing largely because they were able to leverage the AppExchange platform in this manner.

But Kingstone wishes Salesforce.COM would go one step further, and help ISVs generate even better economies of scale.

"What I'd love to see is revenue sharing," she said.

Denis Pombriant, managing principal at Beagle Research, said such moves show that Salesforce.com is looking to become the next disruptive innovator in the software platform space."

"It looks like they're going to challenge the established players like Oracle and Microsoft."

This article was originally published on May 30, 2006
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