This year marked the release of our 3rd Annual State of AppExchange Partners Report. As in previous years, we surveyed around 100 AppExchange-partner executives to understand the trends and impacts of the program. As a special feature this year, we partnered with Crunchbase to provide an in-depth examination of the investment and funding landscape.
You can download the report in full here:
It’s Prime Time
We see that the AppExchange has continued to crescendo, and one theme that emerged as we examined the data is that the AppExchange is reaching the goals that every organization strives to reach:
Consistent, above-average growth
Goals being set and exceeded
Intra- and inter-organizational integration and alignment
Also known as the Prime stage.
Based on Ichak Adizes’ Corporate Lifecycle Model, we find that by all measures, the AppExchange fits squarely into the Prime stage. Our survey shows that over 95% of respondents forecast revenue growth will increase -- with 39% stating growth will significantly increase (more than 50%). Furthermore, 65% of respondents state their participation in the Salesforce ISV Program increased their company’s revenue.
To help partners better understand what this data means for them, we’re taking a deeper an examination into the 5 categories explored in the report:
Product & Company
Technology & Platform
Salesforce as a Channel
Product & Company
In the Product and Company category, we examined the trends of how partners are building and implementing on the AppExchange as well as examining the motivating factors of why companies choose to join the program.
Top 3 Reasons for Joining the AppExchange
Faster Time to Market
Access to the Install Base
Gateway to the Enterprise
Organizations that reach the Prime stage often experience a shift from technology-focused goals to business-focused goals. And we see this reflected in our survey data. For the past 3 years, platform motivators (e.g., Security and Scalability) have fallen away in importance to partners.
Once an organization has reached the Prime stage, it is assumed that these platform components are foundational due to continued business success and work with enterprise organizations, which is true for Salesforce. And, as the data shows, partners are hungry for those enterprise accounts.
Faster time to market has led for the third year in a row as a primary motivating factor, but access to the install base is quickly rising to the same level. To meet these needs, the PDO ecosystem continues to grow and support partners.
The Multi-App Strategy Continues to Grow
First and foremost, more partners are building more applications. Over the past three years, we see a 4% increase (from 43% to 47%) of those who have more than one product on the AppExchange. Based on our understanding of network effects and the strength of the ecosystem, partners look to adopt a multi-product approach to solve several business needs (which we’ll examine in the next post of our series).
More Products Mean More Implementations
Last year, we saw a positive correlation between the growth of SIs for Salesforce and SIs for ISVs. And the trend has continued upward. The number of respondents reporting they do not work with SIs dropped almost 50% from 36% to 19%.
We expect that SIs will continue to play a fundamental role in AppExchange success for customer deployments and customizations.
The Connector Program as a Gateway?
While ISVforce and OEM partnership agreements continue to dominate the landscape, there was a slight uptick in the participation of the Connector program (up from 14% to 27%). Of that same cohort, 40% of those leverage another type of distribution agreement. We believe that partners are testing different distribution strategies to bring their products onto the Salesforce platform to meet their business goals.
Anecdotally, we find from our book of business that those who are successful with their Connector application often move into an ISVforce or OEM partnership agreement for subsequent builds or additional products.
Industries and Partners Partnering
When Keith Block joined Salesforce, he started the process of Salesforce speaking in terms of industries. Since then, Salesforce has continued to invest in specific industries, and ISVs are stepping up to fill the whitespace.
27% of respondents focus on a single industry, and we see that Salesforce’s strategy of bundling solutions together with industry-specific clouds is generating success for both Salesforce and the ISVs.
The approach of developing general business applications remains strong as well. 32% of respondents note they serve 10+ industries. Salesforce’s investment in industries is not a zero-sum game; both industry-specific and general business applications are seeing accelerated growth.
Even more exciting, ISV partners are coming together to solve the needs of end-customers. The process of partners partnering is the outcome of the network effects we discussed in last year’s report. With over half of respondents indicating they sell across SMB, Midmarket, and Enterprise, it is evident that these same network effects are amplifying business outcomes and reach.
In the next deep dive of our series, we’ll explore the responses around growth, the top 3 challenges reported, and examine why the goal of increasing customer lifetime value is indicative of the Prime stage. Check it out here.
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