The Great Separation: How ISVs Are Leaving the Competition Behind

CodeScience’s 4th Annual State of AppExchange Partners Report provides an independent look at the Salesforce AppExchange via survey responses from leaders who are building their businesses there. In this year’s report, we examine the concept of The Great Separation and why partners in the ecosystem are experiencing unprecedented resiliency in the face of so much change.

With 46% of our respondents stating they are expecting to surpass their original revenue projections, this doesn’t sound like an ecosystem that is struggling. There are 3 common characteristics for companies who are thriving and carving out their lead as part of The Great Separation.

1. They are repackaging existing technology into new solutions that solve the challenges customers are facing.
2. Said solutions are positioned as business continuity rather than digital transformation.
3. The companies are all investing heavily in R&D, Sales, and Marketing.

Throughout our report, we feature companies who have embraced The Great Separation — repackaging their technology into offerings specifically designed to meet the challenges of a post-COVID world. One of the most notable examples is nCino, a digital banking platform for loan origination. The company, which celebrated an IPO in July 2020, has been a key player in financial technology for more than nine years. As such, its technology is battle-tested and exceedingly mature.

As the COVID pandemic continued to escalate, nCino Chief Product Officer, Trisha Price, led the company in repackaging their technology to handle the specific use case of the US Government Paycheck Protection Program (PPP Loans) — a massive fund of over $500B. The new nCino SBA solution, deployable in mere days, enables banks to originate SBA PPP Loans. Originate they did — the solution-processed approximately 10% of the entire fund in less than three months. Repackaging existing technology as a business continuity solution enables nCino to thrive.

And nCino is just one of the companies that fully embodies the resilience of the Salesforce ecosystem. Moreover, Salesforce itself is another shining example of the continued strength of the platform. Throughout 2020, Salesforce focused on adapting its flagship product — Sales Cloud — to help businesses and their employees return to work. Leveraging location tracking, self-attestation, learning, smart workflows, and more, Salesforce re-imagined core functionality to cater to the business challenges of our new reality. These are just two examples of companies that have embraced The Great Separation and pulled ahead of their competition.

Our report is broken down into 6 sections, and you’ll discover how other AppExchange partners are leveraging Salesforce in the following categories:

1. Product & Company
2. Growth
3. Technology & Platform
4. Salesforce as a Channel
5. Diversity & Inclusion
6. Investment (powered by Crunchbase)

One of the most telling indicators discovered via our survey is that 44% of respondents have more than one app on the AppExchange. From a product trend perspective, this is further proof that a multi-app strategy is continuing to prove fruitful for many ISVs. More striking, is our finding that 53% of respondents plan to add another product to the AppExchange over the next 12 months, with a staggering 74% of those with one app listing planning on adding another. The consistency of the multi-app strategy shows that many ISVs are choosing to tackle complex, multi-faceted challenges which underline the importance of aligning with Salesforce and solidifying go-to-market strategies.

And ISVs are continuing to find success by aligning with Salesforce. In a year as fiscally challenging as 2020, 53% of our respondents stated that participation in the Salesforce AppExchange increased their revenue. It’s also worth noting that our participating ISVs responded stating their investments will remain similar to investments made in 2019. Overall, these findings point to the conclusion that Salesforce ISVs are continuing to rely on the platform’s flexibility and the value of re-assessing and re-packaging solutions to solve evolving business challenges.

Long-time readers and followers of this report may notice an additional section this year: Diversity & Inclusion.

In our Executive Summary, CodeScience CEO, Brian Walsh, explains why we feel it is important to surface the stories and stats around D&I:

The tragic racial and social injustice events this year have brought a new focus on systemic issues that continue to plague the US. A dear friend of CodeScience encouraged us to use the platform of the State of the AppExchange Partners Report to explore how the AppExchange ecosystem is working through diversity and inclusivity issues, and we are thankful for the encouragement. We are committed to having this be a permanent addition to our annual report.”

Just as 2020 was marked by unprecedented circumstances for business leaders, our nation experienced urgent reflections on the topics of race and equality following the deaths of George Floyd and Breonna Taylor. Given the weight of these issues, we felt it timely and important to bring the topic of diversity and inclusion to the forefront of AppExchange ecosystem exploration.

Specifically, we surveyed executives on their perception of diversity and inclusion as a business value driver and the ways in which their organizations foster more dynamic cultures. Of our respondents, 23% recognized diversity and inclusion as a significant driver of business growth, while a large majority — 94% — recognized the importance of investing in diverse teams. These statistics show that while diversity of thought within businesses remains a high priority, many organizations are still navigating the path of influence D&I initiatives have on overall growth.

This year’s response to the top reasons partners chose to leverage the AppExchange represented the first major change to our survey. Where previously we asked partners the reason they chose the AppExchange, we now asked, “What attributes of the Salesforce platform and the AppExchange will be most critical to your organization’s ability to successfully navigate the post-pandemic marketplace?”

What is it about the Salesforce ecosystem that makes it so unique? Often, it is Salesforce’s strategic leadership and initiative to pave the way for partners to follow along. Each of the top three attributes noted above (access to the install base, Salesforce’s credibility with customers, and ability to pivot and get to market quickly) are values that Salesforce’s leadership has enabled through the product they’ve built and the community they’ve fostered.

In examining the findings of the top 3 challenges partners face, Acquiring New Customers takes the number 1 spot. This is the 4th year in a row that our respondents noted this as their primary challenge. Second to that is Evolve our product offering. Acquiring new customers and evolving product offerings reiterate that the old way of doing business is no longer an option, and business leaders must understand how their solution can become part of the Great Separation.

The tertiary challenge of Hiring employees may seem surprising given broad economic trends, but in digging into the results deeper, we find that this challenge is in response to the radical shift of what it means to be an employee with a company. No longer is hiring about volume. But rather, hiring, training, and maintaining the right employees. Businesses are asking the question — how do I find, identify, and onboard employees without offices or in-person events and make them feel like they are part of the culture.

Since the inception of our report, we have asked partners about the impact of the partner program on their revenue. Overall, more than half state that their participation in the Salesforce ISV program increased their revenues. We found that there tends to be an inflection point based on the maturity of the partner and the value they see from the program. The responses show that once you hit the four-year mark, you’re more likely to note that participation increases revenues.

With the many tasks, operations, and investments it takes to get started as a successful AppExchange partner, this inflection point is unsurprising. We will continue to examine in future iterations of the report if there is a correlation between R&D investment and the perceived impact of the partner program.

As we were putting the final touches on the report, major M&A activity happened in the ecosystem. Vista Equity Partners announced the acquisition of Gainsight for $1.1B, and Salesforce confirmed their purchase of Slack for $27.7B.

With the continued support from our friends at Crunchbase, we found that funding has remained strong in AppExchange companies this year. As of December, venture funding to those companies has reached over $4 billion, representing over 8 percent growth of the $3.7 billion invested in 2019. Investment in late-stage rounds account for 66 percent of funding so far in 2020, and funding at seed/angel has reached $181 million, a record for this stage in the last five years.

I’ll refer back to Brian’s message to partners for what we hope readers get from this report.

Ultimately, the message we are bringing to partners for this year’s report is a message of opportunity. When the clock struck midnight and the calendar turned to January 1st, no one could have predicted what 2020 would hold. While the definition of normal has changed, while unrest and injustice plague our country, all organizations are searching for their opportunity to grow and succeed. Whether you are thriving already or just now finding your footing, the ecosystem provides a path to move forward.”

These are just a few highlights from our report. Download the report in full to access our full insights today!