At Dreamforce, we released our 2nd annual State of AppExchange Partners Report that focuses on how the best partners are continuing to grow by leveraging the AppExchange and the network effects with it. To further explore the report, our CEO, Brian Walsh, moderated a panel with some of the best and the brightest in the industry so they could share their experiences with the AppExchange and react to our findings.
The panel consisted of a range of industries and company stages to represent the ecosystems’ variety:
Susan Hill, SVP Global Products and Services at AHM – an IQVIA Company
Angela Carter, Senior Client Partner – Korn Ferry
Tom Martin, CEO – Glance Networks
Laoise Murphy, VP Software Development – Fenergo
You can watch the session in full below or read on.
Setting the Stage
As discussed in the AppExchange Partner keynote, the Salesforce AppExchange is a two-sided network effect — meaning, it connects its 150k+ customers with its 4k+ products and drives value from these connections by solving business challenges.
Brian put it like this,
“Network effects are in full effect right now. We’ve seen that measure across so many different metrics of our survey. [Salesforce] really is a platform network effect, which is a two-sided marketplace. We have customers purchasing from Salesforce and product companies, ISVs, that are developing products. In the world of the network effect, each node that is added on either side provides more value for the overall network. So the more customers we have, the more value there is for our partners — the more opportunity for distribution. The more products there are on the AppExchange, the more value there is for the customers at Salesforce. It also creates an incredible moat around Salesforce, and I think that’s really what the AppExchange expresses for Salesforce.”
Product and Company
As we took a look at the business drivers of products and the histories that companies have with the AppExchange, we called out a few key stats:
- A whopping 45% of ISVs have more than one AppExchange app.
- The number one reason companies joined the AppExchange is Time to Market. However, this is closely followed by Access to the Install Base and Gateway to the Enterprise.
- The AppExchange isn’t just for startups — there were a number of additional partnerships and product announcements by public companies as well as industry plays within the ecosystem.
To kick off the panelist section, Brian asked the question, “Why Salesforce?” We found this quote from Angela Carter of Korn Ferry interesting in how they worked with Salesforce to better leverage their data and expertise.
“One of the things we were doing at the time was looking at how we could better explore the use of our data. It was certainly being used by our consultants and the delivery of service engagements, but we hadn't necessarily productized it in an easy to market way. So the marriage between the Salesforce platform and our capability with the additional thought leadership that the [Salesforce] Ignite team brought together was a perfect match for us.”
Susan Hill of AHM added:
“The first five reasons why is because of their commitment and focus to Life Sciences. It is a very strong platform in the Life Sciences industry. So every time we walked into a customer’s door, we were able to check five boxes that said, ‘yes, we are a Salesforce platform’, which was very beneficial for them for ease of integration into their ecosystems that were heavily Salesforce-based...In addition, it was about time to market. Historically, AHM was a technology-driven services company. We wanted to transform the company to have the technology come up and be in parallel with the services. We wanted to not just be about the services, we wanted the technology to be key in this because of course as we see services transform, it really is all about the technology that enables the services. Faster time to market to be able to do that transformation as well as the fact that it is a very strong standard in the life sciences.”
Laoise Murphy of Fenergo explained her reason,
“Why did we get involved with Salesforce? Primarily, our customers asked for it.”
Brian pointed out how these companies are able to regularly drive success,
“Each of these companies has essentially filled a white space within the Salesforce platform — we’ve seen the most successful products and companies with Salesforce and the AppExchange are filling white space and they’ve carved out that space and owned it.”
Why? Because Salesforce cannot solve every business problem alone and that is where its partners come into play. By filling the white space, you are able to leverage the Salesforce network for your own gain.
Growth in the AppExchange was one of the most compelling sections of our report this year. Not only did 82% of respondents see an increase in both top line revenue and revenue growth rate, but 31% of respondents are growing more than 50% YOY and increasing their growth rate greater than 50%.
When we look at respondents top 3 challenges, we see that acquiring new customers and hiring engineers remained the same, but there was a shift from reducing implementation cost and time to moving upmarket, which reiterates the point that Salesforce partners are leveraging the platform for access to larger markets and bigger customers (i.e. access to the enterprise).
Angela Carter of Korn Ferry discussed how they are facing their engineering challenges:
“It is really thinking through what are the real skills we truly need to have in-house versus what we can partner with from an ecosystem or an integration perspective. We know that engineers are very hard to find and maintain...creating a really strong company value proposition for why people want to come and work at your company and stay at your company is going to be incredibly important over the next 5+ years.”
Technology and Platform
Salesforce is always enhancing the platform and its technology. In our State of AppExchange Partners Report, we saw that “the longer a feature has been in market, the more important that feature becomes to ISVs.”
While Salesforce continues to iterate and test, partners tend to take a more conservative approach to adopting these new features. Often partners wait for the adoption of certain technologies to become mainstream and in-demand by customers.
However, once partners do adopt well-established features, they are well accepted.
Laoise Murphy of Fenergo explains her experience with Lightning,
“The beauty of Lightning for us is that we can reuse that component when we go to our second cloud.”
That reusability allows companies to move their components over to different clouds and decrease the time to market.
According to Susan Hill of AHM:
“We have just recently migrated our platform to Lightning. The development of Lightning and maturity of Lightning was critical to our business. We were putting too much overhead in maintaining the custom components we built and losing some of the benefit of being on a platform on a cloud. Going to Lighting and being able to use more standard components from Salesforce is really an important piece because we want our focus to be on our subject-matter expertise — that way we layer into the application and not on those components that can be really consumed across the ecosystem and are not specific to us.”
Salesforce as a Channel
When talking about Salesforce as a Channel, we found that 61% of leads coming from Salesforce came from the AppExchange listing — combine this with the enhancements to the AppExchange, partners have much to look forward to.
A great dialog occurred between Tom Martin of Glance and Brian:
Brian: If we look at Facebook, Twitter, and LinkedIn, they definitely are experiencing network effects. There are billions of users in the case of Facebook, but just because we sign up and join does not mean that we immediately have a million followers. It doesn’t mean that we have this huge platform to speak from. It takes a lot of work in each of those individual channels to understand the dynamics, who the key characters are, what are the behaviors that will encourage followers. You can build up to have a large platform on Twitter or on Facebook, and I think it stands here as well. Just building a product, if you build it they will come, is not a smart way to approach the AppExchange. It truly is about building those networks.
Tom: In not only building out the Salesforce channel, but also working with the right product teams, finding who is going to be your internal champion, understanding what the development roadmap looks like, figuring out how you can really build and deepen and leverage those relationships so you can build your app to further that experience and finding out where you can have success.
Brian: Totally. This may be a tech company, but it is still run by humans and those relationships matter.
Susan Hill of AHM shared her experience with leveraging Salesforce:
“Learning how to engage with Salesforce best practices has been learning experience for us... You need to leverage the partner ecosystem. There are things you don't know that you need to know, and no one is going to hand them to you if you don't develop a network and find a partner. Whether it be from a relationship standpoint and how you manage subscriptions and licenses and all the accounting pieces, to the type of licensing you need, to how you go about deployment and supporting of the platform.”
Investments and Liquidity Events
The Salesforce ecosystem has seen quite a bit of movement this year, with 6 IPOs and 18 major acquisitions, investment partners are betting big on the AppExchange. Salesforce Ventures opened a $100M fund. Of the companies that Salesforce Ventures has backed, more than $500M was invested by other VCs in 2018. Additionally, according to Crunchbase, we found that over $1.3B was invested in companies within the Salesforce ecosystem this year!
One of the areas where we received feedback from our survey respondents was around PNR (percent of net revenue) and that the current PNR structure was scaring investors away. However, we aren’t seeing the data to support that. When we look at a specific venture fund, Insight Venture Partners, who has over $20 Billion of assets under management and currently has 29 investments in the ecosystem (most of which are major players), we see that many of their companies are experiencing liquidity events and that their bet on this ecosystem is paying off.
Special thanks to our panelists for their insights and participation. Susan Hill of AHM wrapped the session nicely with this thought, “You need a partner like CodeScience to help you navigate the Salesforce ecosystem. It will save you time and save you money in the end.”
If you are ready to leverage the ecosystem to reach your next stage of growth, get in touch. We’ve brought more than 250 products to the AppExchange and were the first organization to receive the PDO Master designation.
Want to read our report in full? Check out The 2nd Annual State of AppExchange Partners Report.