Analysis: Salesforce AppSpace signals major shift in SaaS

The days of dismissing SaaS as ‘just another delivery system’ are long over. In its Spring 07 rev announced earlier this week, Salesforce.com showed how there is an endless number of ways in which the SaaS company can reconfigure its core competency to serve new purposes.

This time, it’s AppSpace, a hosted portal environment that Salesforce executives like to call MySpace for the Business Web.

By exposing documents through Web services, AppSpace will enable users to create a two-way collaborative, shared environment for its partners and customers, allowing users to bring in mashups and custom applications, including all AppExchange applications, documents, spreadsheets, and calendars.  

Martin Schneider, a senior analyst with The 451 Group, says AppSpace represents an obvious shift by Salesforce away from being a silo of technology with its own data to a more process-centric service.

As it moves up the food chain toward ever larger customer deployments, Salesforce is now able to work with IT rather than circumvent it.

“Before they got in, the decision maker was a line-of-business guy, not IT,” Schneider said.

Initially Salesforce offered its own static data that lived only within the Salesforce platform. But now thanks to Web service APIs and other SOA technology, it is becoming an environment for integration and interoperability with other applications and data.

“Their product is beginning to make sense in a process sense rather than being data-centric,” says Schneider.

Salesforce now includes workflow as part of its service and supports pulling in order data or inventory data to close the loop of a business transaction.

Jeff Kaplan, managing director at THINKStrategies, says AppSpace is a smart move because it extends Salesforce’s exposure beyond CRM to companies looking for portal solutions.

However, Kaplan also sees in AppSpace a warning sign to Salesforce’s own partner base.

“There are a few Salesforce partners that are also in the portal business.”

Partnering with a large vendor like Salesforce is always a double-edged sword. As they expand their portfolio, they run the risk of stepping on the toes of some of their partners. However, if history is any indication, smaller companies will always be willing to enter the lion’s den in the hope of expanding its own customer base despite the dangers, as Microsoft partners know very well.

Denis Pombriant, principle at Beagle Research, likes the second major new feature in Spring 07 almost as much as AppSpace. Dubbed IdeaExchange, it uses the AppSpace technology to capture information from its customers about what they want to see in a new release.

Not only is this user feedback, it is on demand so that Salesforce can use the feedback to drive product direction, according to Pombriant.

“It is in line with a lot of research and thinking coming out of MIT these days,” said Pombriant. That research says that customers are rebelling against having new releases thrown at them without considering their needs first.

Idea Exchange is a technology not easily adopted by Salesforce’s tradition-bound on-premise competitors whose architecture does not allow for the kind of quick turnaround available in a true SaaS application.

With only one code set running, a vendor doesn’t have to spend a lot of time building for different operating systems and different backends. They can build once, test it once, and know that it works for everybody, everywhere. The difference can be seen in the fact that Salesforce releases a new version four times a year while traditionally companies may not even offer a new version on an annual basis.

Pombriant’s conclusion is that Salesforce and SaaS are notgoing away.

“This is the real McCoy,” says Pombriant.