Salesforce ContentExchange

Posted: April 11, 2007 in CRM

Salesforce.com introduced its latest acquisition to the world yesterday.  At a luncheon served up at the Four Seasons Hotel in San Francisco, CEO Marc Benioff said that document management is a core element of the company’s platform strategy.  That strategy has been rolling out in bits and pieces since the company announced its apex platform last year.  But it should not come as any surprise to savvy market observers that things like document management would comprise part of the company’s approach to the market.

For many people, trying to figure out what Salesforce.com is about can be like the blind men touching an elephant trying to figure out what it is.  Salesforce.com has a CRM business which is currently bringing in most of its revenue, a platform business which is just getting started but which shows real promise, and a bulk services business which essentially sells undifferentiated seats which partner applications have tuned to specific uses.  There might be other business plans but those are the ones that are most apparent to me.  If you think about it from a Darwinian perspective, though, Salesforce.com’s actions make perfect sense because it is acting in a highly adaptable fashion. 

As you know, evolution selects the best designs from all those available and lets them replicate.  The trouble is that one never knows what the future holds and so, no one can say for certain which designs will be selected for, that’s where variation comes in to play.  In life, variation means expressing life in many different forms or species with many alternatives within each type.  The business equivalent of a species is a business plan and Salesforce.com is investing in several business plans simultaneously.

Salesforce.com is not inventing anything here.  As far as I can tell, the all time champion in generating and pursuing multiple business plans simultaneously might be Microsoft.  Back in the 1990’s, when Microsoft was generating revenues just north of $300 million—a little smaller than Salesforce.com is today—Microsoft invested in eight different business plans. 

Microsoft wanted to be the leader in graphical operating systems but Windows 1.0 and 2.0 were disappointments.  The company also had to contend with the fact that IBM was introducing a new computer, the PS/2, which it wanted a new multitasking operating system for, which became OS/2.  There was also serious competition from Unix and its champions as well as competition for desktop applications on the PC and the Mac.  There were other challenges too but these are the most germane to the story.

In retrospect we might like to think that Microsoft simply made a big bet and won with Windows and Office, but at the time it was not a sure thing.  Rather than making a big bet, Microsoft made many relatively small bets.  It worked with IBM on OS/2, co-opting a potential competitor, and took what it learned to Windows.  It also continued its strategy of building office applications and continued building them for the Mac as well and at one point it was the largest software developer working on that platform.  Microsoft also continued investing in Windows and hit paydirt with version 3.0 which rescued its MS-DOS business and Windows was a major reason for the continued success of Office.

Today, Microsoft still has a lot of irons in the fire from software to home entertainment to games and much more and it continues to feed each one looking for the next big hit.  In a way it is no different than a venture capitalist nurturing a portfolio of companies or for that matter Salesforce.com feeding several related businesses.

Like Microsoft with Windows, I think Salesforce.com knows that the success of the platform is partly dependent on the success of the individual applications that run on it and for that reason it is working hard to ensure that the platform, Apex, offers as many ways to build applications as possible.  It is also working hard to breathe life into the idea that all applications developed on the platform do not necessarily have to relate to CRM per se.

This week Salesforce.com announced that it bought Koral to anchor a new offering, Salesforce ContentExchange.  In the scheme of things, this was an important addition to the company’s platform technology because it gives Salesforce.com, its users, and its partners, the ability to capture, index, manipulate and use unstructured data, including documents, and because it gives developers wider latitude in the kind of applications they build.

There is a large swath of application types that require more than relational data in key verticals including finance, healthcare, technology, and media to name a few, where document management, not just data management, are baseline requirements.  So with one key acquisition, Salesforce.com has significantly increased the number and kind of applications that can be built with its platform technology and in so doing, it has increased the potential developer and partner community as well.

Will this strategy be successful?  Hard to say, but it certainly increases the variability of potential offerings and in so doing increases the chance that something in the portfolio will make it big.  As a business proposition it doesn’t get much better than that.

So, what did you think?

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