Jacob Rouser
Mar 1, 2019
In this series, we’re breaking down key findings from our 2019 State of AppExchange Partners Report, highlighting how successful SaaS companies leverage the Salesforce AppExchange and how network effects are taking hold. Download the full report here!
Part 1: Product and Company Insights
Part 2: Growth Insights

As we’ve detailed in our previous two pieces in this series, network effects are coming into full effect and helping to drive partner growth. But to fuel this growth, quality technologies and platforms are essential.

Here we’ll take a look at those technologies and platforms, explaining the role they play in the ever-expanding Salesforce AppExchange ecosystem.

Multiple Clouds Mean More Opportunities

While Sales Cloud continues to be Salesforce’s flagship offering, the number of partners building across multiple clouds is increasing.

74% of partners are on Sales Cloud — an increase from 69% the previous year. As for the multi-cloud strategy, more than 65% of respondents stated that they are building on more than one cloud, up 4% from last year.

Service Cloud is inching closer to becoming as big, if not bigger, than Sales Cloud. Service Cloud, introduced in 2009, already accounts for 27% of Salesforce’s revenue; and last financial year, Service Cloud grew 24% while Sales Cloud grew only 16%.

Salesforce’s other clouds such as Marketing, Commerce, and Integration offer ISVs multiple opportunities to enter the market or develop multiple products that fit within or across these clouds. This falls in line with Salesforce’s broader focus on not just enterprises, but industries and SMBs as we covered in the first part of this series.

We expect to see the multi-cloud approach to continue to trend upward. Most Salesforce customers are already using multiple clouds, and by building out a product suite across multiple applications, you not only create a stickier solution but have more chances for up-sell opportunities. Additionally, the investment into a multi-cloud approach reduces implementation costs and the total cost of ownership. With many Salesforce customers having complex org structures and environments, building across multiple clouds takes away the customizations that would be required to make the solution work.

The Changing Dynamics of Joining the AppExchange

As we covered in our Product and Company deep dive, when we look at the channel as a whole, the top three reasons to build on Salesforce are Faster Time to Market, Access to the Install Base, and Gateway to the Enterprise.

However, when we break down the responses based on how long partners have been a part of the ecosystem, the reasons for joining differ. For partners that have been in the ecosystem for 6-10 years, Faster Time to Market and the Partner Ecosystem were by far the top two reasons, respectively, with Gateway to the Enterprise and Scalability tied for third.

When you look at newer partners that have only been in the ecosystem for 1-5 years, the order of importance changes -- Access to the Install Base and Faster Time to Market become the primary reasons, respectively, and Gateway to the Enterprise becomes the tertiary.

Partners see the AppExchange as a way to build products and get to market quickly. However, as covered above, the difference between older and newer partners is in the way that they view the composition of the AppExchange — with older partners favoring the partner ecosystem and newer the install base.

This difference is interesting because newer partners are looking for the fastest way to realize revenue (i.e., the install base as an additional stream of revenue), while older partners see the opportunity with the partner ecosystem and leveraging network effects to amplify their revenue. We suspect that older partners have seen the AppExchange grow and understand that the partner ecosystem provides a tremendous opportunity for growth. Newer partners may still be getting the lay of the land and making connections within Salesforce and the broader ecosystem.

Features Gain Importance with Time

When we analyze the ecosystem from a technology perspective, it’s clear that features become more important to ISVs the longer they’ve been in market. We gauged the ecosystem’s view on the importance of various features with our survey, all of which can be seen in the charts below.

The gradual increase in the importance of features makes sense for a variety of reasons, the most obvious being that new products simply take time to become widely adopted, and therefore seen as important.

Often, new features aren’t always available to partners immediately. A perfect example of this is Einstein and Lightning. Einstein only became available to ISVs during the Spring ‘17 release, while Lightning has been available since the Winter ‘16 release. Now, Lightning is mandatory and has grown to be one of the most important platform features.

Finally, one of the biggest reasons that these features gain importance is customer adoption. To state the obvious, the faster customers adopt features, the more it drives the investment by ISVs in those features. By rolling out features like Lightning to customers first, Salesforce can drive buzz and garner feedback so tweaks and updates can be made before they open the availability of these products for partners to develop with. Additionally, Salesforce can accelerate the rate in which features are adopted by imposing requirements from both partners and internal team members. We saw this with Lightning, where Salesforce is requiring ISVs to be Lightning Ready to go through Security Review as well as requiring their Sales Engineers to only demo in Lightning.

Comparing this year’s results with last year’s, Lightning, Einstein, and Mobile all look to have increased in how important they are viewed — continuing the trend of gaining importance with time.

As the ecosystem and platform continue to expand, more opportunities are available for partners. While the reasons for joining may differ between old and new partners, the results don’t — companies on the AppExchange are experiencing unprecedented growth right alongside the ecosystem.

Are you looking to tap into the AppExchange? Or are you considering a multi-cloud approach? Contact us! We have helped bring over 220 products to market and our mission is to help partners thrive.

We’ll be taking a deep dive into Salesforce as a channel in the next piece of this five-part series — be sure to subscribe to our blog so you don’t miss it.

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