This is the second post of our State of AppExchange Deep Dive Series. We’re examining each section of the report and providing partners a deeper exploration of the findings. If you missed the previous post on Product and Company, you can check it out here.
If you want to read the report in full, click the image below!
Growth
The Growth section of our State of AppExchange Partners Report examines partners’ predictions for the coming year as well as discussing their performance from the previous year.
65% of respondents state their participation in the Salesforce ISV Partner Program increased their revenue.
This should come as no surprise as Salesforce has continually met and crushed their own goals. We see those who are betting on the ecosystem see their investment pay off.
Partners Predict a Bright Year for 2020
Partners are confident in growing their businesses. For the 3rd year in a row, over 90% predict their revenues will increase. Of that, more than a third predict their revenues will significantly increase (more than 50%). When forecasting revenue growth rates, 85% predict an increase, with 27% predicting a significant increase.
This additional revenue isn’t just being held. Partners are reinvesting this revenue into R&D (both internal and external) to enhance their product offerings. 70% of respondents are increasing internal R&D, with 31% increasing external R&D through PDOs.
Growing Revenues Mean Growing Companies
As we discussed in our product and company section, customer acquisition is top of mind for partners. For the first time in our survey, more partners are stating that they are increasing sales personnel than developer personnel. This coincidentally resulted in a tie for the second-most pressing business challenge for respondents.
More than 4/5ths (81%) of respondents said that their companies are forecasting headcount growth. 77% report increasing Sales headcount, which is a 50% increase from last year’s survey of 27%. For developers, 71% of respondents report increasing headcount, which is a 12% increase from last year’s needs and echoes Salesforce’s job statistics of creating 3.3 million jobs worldwide by 2022.
Challenges Present Opportunity
The one area of our report that always sparks a number of conversations is the Top 3 Challenges Partners face. This stat tells us much about the health of the ecosystem.
In any healthy ecosystem, especially one that is in the Prime stage, businesses will always zero in on acquiring new customers. However, this year, with the rise of hiring more sales personnel and increasing customer LTV, we wanted to examine why this shift may be occurring.
We see that as an entity, Salesforce has secured a major stake in enterprise businesses (echoing our findings that a primary motivator of joining Salesforce is access to the enterprise). Winning business in the enterprise is no easy feat. It requires a robust sales team and mature processes to land and support.
The challenge for ISVs targeting enterprise accounts manifests from there. They must ensure their products are scaling to the same enterprise-level of the Salesforce platform. Once a business focuses on enterprise accounts, changes in the sales process, support mechanisms, and product enhancements must occur to live up to the scale of these accounts.
Our data shows us that 50% of high-growth performers (those who said their revenues are significantly increasing) predict a significant increase in all three areas of their business: sales personnel, developer personnel, and R&D (both internal and external).
We also know that as partners increase the number of large enterprise opportunities in their pipeline, the cost of acquisition (CAC) increases. There is a positive correlation with the cost of sales as businesses move up market. For business leaders, they must show an equivalent rise in the value of these deals, and the focus on LTV begins makes sense — business leaders must ensure that the investments into building our their teams are paying off as they scale.
Next up in our Deep Dive series is Technology and Platform. We’ll examine why more partners are building on more clouds to accomplish their growth goals, and we’ll break down our findings on how partners are using the various technologies Salesforce offers in their products.
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