Music and Software
On the other hand, Salesforce.com is also counting on the low cost of Internet distribution to make it practical for partners to sell access to small, low-cost applications on the Web. To support this view, Salesforce.com invited Chris Anderson, Wired Magazines editor in chief, to speak at the Dreamforce user conference about why the Internet can do for application sales what it already has done for music sales.Click here to read about Oracles $5.85 billion buyout of CRM software producers Siebel Systems. The Web eliminated the expense of CD releases and for that matter most other distribution, marketing and promotional expenses. Musicians didnt have to produce a hit recording to find a niche as long as fans could find their music on the Internet. There is always room for another music niche on the Web, according to Anderson. Hosted application services like Salesforce.com are about do for software what the Internet has already done for music, drastically cutting the cost of distributing applications to a vast array of potential market niches. Anderson quoted Excite.com founder Joe Kraus in explaining why markets for small niche software products have been so slow to develop. Its because the software industry is much like the music industry, where "the focus has been on dozens of markets of millions instead of millions of markets of dozens," according to Kraus. It was simply too hard to write, integrate, customize, support and distribute applications that serve narrow niche markets, noted Anderson. Those rules no longer apply on the Internet because its no longer a matter of manufacturing, storing, shipping and installing software on CD-ROMs that costs hundreds or thousands of dollars. Click here to read about what one industry analyst thinks about Oracles prospects for integrating the multiple CRM products it has acquired over the past years through corporate buyouts. Furthermore software buyers no longer have to buy and assemble an expensive infrastructure of servers, storage devices and databases to support these applications. That cost and risk is borne by the hosting service. The prospects for on-demand applications services and the prospects of Salesforce.coms AppExchange sound suspiciously like the promises that were made for e-commerce in the heady days before the dot-com crash. There were fervent claims made about the efficiency of the Internet, and "frictionless commerce" was going to turn classic economics on its head. But another law of economics states that "there is no free lunch." And Salesforce.com and all its application partners are going to have to show that AppExchange can support a far larger developer community and that there is a generous revenue upside to prove the long-term value of this new venture. John Pallatto is a veteran journalist in the field of enterprise software and Internet technology. He can be reached at email@example.com. Check out eWEEK.coms for the latest news, reviews and analysis about productivity and business solutions.
Anderson is completing a book, "The Long Tail," that shares its title with his Wired Magazine online blog and examines how the efficiency of Internet downloads made it possible for garage bands and independent musicians of all kinds to have a market for their music.