Apex Release Moves Salesforce.com Beyond CRM Roots

News Analysis: The introduction of the Apex programming platform has the potential to create a new revenue stream that could exeed Salesforce.com's bread and butter CRM business. But it's going to take time.

With its winter 07 release event in San Francisco on Jan. 16, its safe to say Salesforce.com is no longer primarily in the customer relationship management business.

The winter 07 release brought with it the first glimpse of Salesforce.coms proprietary (though Java-based) programming language and development platform, dubbed Apex.

That first look-see for developers—the beta version is expected later in 2007—far and away trumps any CRM functional upgrades in winter 07.

It also provides Salesforce.com with a revenue model may well exceed CRM license sales—the companys bread and butter to date.

The idea with Apex is that Salesforce.com customers—and perhaps more importantly, partners—can develop applications and components, using not only the Apex code and dev tools, but Salesforce.com infrastructure services as well—an operating system, database, application server, or data center, for example.

The Apex platform itself, which lets users build multi-tenant, or shared-infrastructure applications, offers a feature set for building application components: data models and objects to manage data, a workflow engine for managing data collaboration, or a user interface model.

More importantly, according to Salesforce.com officials, Apex can be used to build complex applications like ERP (enterprise resource planning) as well as intelligent applications like yield management.

Using Apex, developers can also customize their Salesforce.com apps, or reprogram any component of Salesforce.coms CRM applications.

"The arrival of Apex heralds a new era in which all application categories will be available on demand," said Marc Benioff, Salesforce.coms CEO, during the Jan. 16 winter 07 event.

"By making the Apex platform and programming language available, Salesforce.com is enabling the ecosystem to lead the way for the next level of innovation in on demand."

Goldman Sachs analysts Rick Sherlund and Christopher Sailer say they believe that while Apex will broaden the market for Salesforce, it will take a while to pan out.

"We believe the companys strategy of supporting a wide range of applications on its on-demand platform by offering developers a flexible on-demand programming tool with Apex should expand the addressable market opportunity over time," the two analysts wrote in a research note released Jan. 16.

"Apex is currently in developer preview with the beta expected later this year (most likely summer), and so adoption is likely to span several years."

The linchpin for partners using Apex is both AppExchange and AppStore, where partners can market and then sell the applications they build using Apex.

The caveat here is both partner adoption and timing. So far AppExchange has just about 250 partners developing third-party applications. And while AppExchange has been around for a little over a year, the AppStore itself is a fairly new concept—partner services will be available on a rolling phase throughout 2007.

The e-commerce engine that powers the AppStore transactions isnt expected until some time in 2008.

AppStore will also provide a revenue sharing model for partners and Salesforce, one that may be well suited for smaller startup companies, but that could get onerous as companies grow in scope and revenue.

/zimages/3/28571.gifClick here to read more about Salesforce.coms AppStore.

AppStore services wont come cheap for partners, with fees breaking into several categories. For co-marketing services, available in February, charges will run between 10 and 25 percent of the first year of revenue based on the leads generated with AppExchange and the level of service provided.

E-commerce services, dubbed AppStore Checkout, will include online ordering, billing, invoicing and collection services, which include the option for customers to add their third-party billing to an existing Salesforce contract.

Salesforce will charge partners a 20 percent commission on all amounts invoiced on an ongoing basis.

But Salesforce, which seemingly has its game on in every facet of marketing, is also sponsoring global AppExchange incubators to help companies get on board with the Apex platform.

So far, 19 companies have signed up for the first incubator, located in the old Siebel building in San Mateo, Calif.

Those companies, announced at the San Francisco event, include a mix of lesser-known and brand name companies, such as: Appirio, Avankia, BackWeb, BlueWolf, Business Objects, Centive, Cloud 9 Analytics, Clicktools, Convenos, DomoDomain, Dreamfactory, Hyperion, InsideView, InvisibleCRM, Opsource, Right90, RingLead, VerticalResponse and Xactly.

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