Oracle (NASDAQ:ORCL) CEO Larry Ellison thinks enterprise software is a mature industry. The next phase, according to him, is consolidation, and he's pushing that trend by buying up the likes of Siebel (NASDAQ:SEBL) and PeopleSoft.
But Marc Benioff, a former Ellison employee and the founder of Salesforce.com (NYSE:CRM), doesn't agree. His company provides solutions for customer relationship management, or CRM, and it's been growing at hyperspeed. Benioff doubtlessly wants to keep it that way, and his strategy involves a relentless focus on product innovation -- most recently, with a new initiative called AppExchange.
Here's how the company pitches it: "First came web sites like Amazon.com (NASDAQ:AMZN) and eBay (NASDAQ:EBAY). Then virtual music centers put songs at people's fingertips. So why hasn't someone created an iTunes for business applications?"
With AppExchange, Salesforce.com has opened up the application program interface (API) for its software platform. In playground terms, it's inviting the other kids into its sandbox and letting them play with its toys. With Salesforce.com's API, other companies can develop programs that cooperate with and customize Salesforce.com's software. It's the same way that Google lets Web coders create sites that use Google Maps to show, for example, the stock market results of leading companies based on their location in the U.S. The idea here is that Salesforce.com doesn't have the resources to build custom applications for every customer -- so why not allow customers to make their own, and distribute those programs to others? AppExchange makes it happen.
The applications cover numerous areas: sales, service and support, finance and support, non-profits, and so on. Appforce Compensation Tracking helps track and provide compliance with commission-based plans; eCredit allows a sales rep to issue a credit request; and Appforce Vacation Requests manages requests from employees who want to schedule time off.
There's a bit of a risk here; how well these applications integrate with existing platforms will determine their relative success. But on the AppExchange, there is a comment/rating system. Again, it's like eBay's community concept. If an application gets bad reviews, no one will use it. It's an easy way for SalesForce.com to enforce quality.
With just a few clicks, a user can not only download these applications, but also further customize them for specific needs. It's Salesforce.com's attempt to serve the many customer-relationship-management and IT-infrastructure needs that large corporations may overlook or neglect. To help encourage application development, Salesforce.com allows developers to charge for their creations, while not taking any fees itself.
AppExchange is yet another indication that Salesforce.com wants to be more than just a customer relationship management company. "[T]hat's where the opportunity lies for us: a widely expanded market beyond CRM," said Benioff. "We think this strategy has the ability to help us sell subscriptions to a broader audience."
So while many other enterprise software companies are trying to survive by snapping up smaller competitors, Salesforce.com is constantly finding ways to grow. AppExchange might prove to be its latest success.
Amazon.com and eBay are Motley Fool Stock Advisor recommendations. Click here for more market-beating advice from David and Tom Gardner.
Fool contributor Tom Taulli does not own shares mentioned in this article.
