Standing out: Salesforce opens up on unusual channel model

Salesforce claims its unconventional partner model will bring success as the channel becomes more consumerised. Hannah Breeze finds out the details

Many newcomers to the channel may have been introduced to the industry with a simple diagram explaining how it all works. ‘Vendors' is scribbled at the top, with an arrow pointing down to ‘distributors' followed by another leading to ‘resellers', which finally branches out to ‘customers'. Simple. But not for much longer, according to Salesforce, which suggests its vastly different approach to building a partner network is best, especially in light of the growing consumerisation of enterprise IT.

Unlike other tech vendors which go to market through an army of traditional distributors and resellers, Salesforce's model sees it directly aligning to a partner, which then creates its own offering based on the vendor's kit. Instead of reselling vendor licences for rebates, partners design and build their own technology on top of Salesforce's in the form of an application, which is displayed on AppExchange - Salesforce's own iTunes-style marketplace. Once orders start rolling in, partners then pay Salesforce a certain percentage of net sales.

Melissa Di Donato (pictured), vice president for OEM and ISV at Salesforce, explained how the company's philosophy works in practice.

"The way we on-board our partners is, number one, we look at their business idea - is it valuable to our customers and is it a white space? Does it solve a need our customer has?" she said. "And that is unique. A lot of other vendors' channel programmes say ‘here's our tech, go sell it!' to a reseller and they are happy. We don't want that. We want them to utilise our technology in a useful way for our customers.

"We do a revenue-share model - a percentage of net revenue, which is a standard 25 per cent. [Partners] sell their app for whatever they want to sell it for and then we take a percentage. It's pretty straightforward: if you sell, you pay us; if you don't sell, you don't pay us."

Survival of the fittest

In the traditional resale channel, signing up to be a reseller can be a simple task, with many vendors requiring just a few basic details before enrolling a company - albeit to the lowest tier and with limited benefits. But Salesforce insists its recruitment process is as rigorous as possible.

Di Donato said the process begins with a business review where a partner's idea is analysed by Salesforce to check it has not been done before and answers a genuine customer need. Following that is a technical review where partner and Salesforce techies team up to map out the specific features
of the app. Last but not least comes a security review which ensures partners are in line with Salesforce's procedures.

"During this journey, they are utilising the [Salesforce] technology at no cost to them," she said. "They can get into the market for free. So we're not standing in their way and are giving them everything they need."

Distie dilemma
Once a partner's app has gained the seal of approval on the three stages of the recruitment process, it can join more than 2,700 others on Salesforce's AppExchange - its answer to distribution. Customers can log on to the marketplace and select the application they want, often after demoing it during a free trial.

Di Donato said old-school distribution does not always wash with today's customers.

"The easy way for our customers to be able to find partners is to go to the AppExchange and search for any kind of functionality," she said "They can search for expense, they can search for big data [and so on] rather than call up their [distributor] rep and say ‘hey, have you got any partners?' and the rep calls me and says ‘have you got any partners for them?'

"They can install directly from the AppExchange, which is very helpful because otherwise you have to call up [a distie] on an 0800 number. It's no fun - people don't want to talk to people any more. Everyone wants to do it online; it enables people to connect in a social way, and they can do it from their phone. You can log on to AppExchange straight from your phone and it is curated in a way that is mobile ready. You can download it if you're bored on the beach and you're a business leader looking for a new app - there you go. We help partners get into those customers."

Consumer vs enterprise

Part of the reason the AppExchange works well, Di Donato said, is because business buyers are acting more like consumers. The consumerisation trend is not new in the channel - analyst Forrester urged B2B marketers to embrace social marketing and ditch old-fashioned emails, and last autumn HP launched a consumer-style advertising campaign for its B2B products. But Salesforce appears to be one of the first vendors to cash in on consumersation when it comes to their channel model.

Salesforce partner InsideSales.com works with both Salesforce and Microsoft for its CRM technology. Its general manager for EMEA, Martin Moran, said Salesforce's channel model is unique.

"If you look at the changing ways companies buy, the AppExchange is an interesting proposition," he said. "If I am a buyer... I can go to the AppExchange - and clearly it is analogous with iTunes - and I can look at, rate, and in some cases, try before I buy. It is a significant difference [to distribution]. From a buyer's perspective, there is less friction in the buying process and the value I get [as a partner] is the shopfront that theoretically every Salesforce user on the planet has access to."

In order to further embrace consumer-style behaviour, Salesforce launched Chatter, an enterprise social network connecting business buyers online to share ideas and leave reviews.

"We did some research which found the enterprise will start behaving much more like consumers in terms of data and business apps," Di Donato said. "We are going to behave a lot more like that, hence the use of things such as Chatter. Chatter is so successful because we can utilise technology to understand better what our people are doing. Ten years ago we didn't necessarily care per se what people were doing in the way we care today. Giving reviews is a very consumer way of doing things - it is a consumer attitude."

OK in the UK

During Salesforce's London event, at which about 14,000 partners and customers gathered, the vendor went to great pains to stress its commitment to the UK and its local partner community.

It claims that by 2018, the Salesforce ecosystem - the vendor, its partners, developers and customers - will have contributed £5.6bn to the country's economy. By then, the firm estimates it will create 50,000 UK jobs too.
Salesforce chairman Keith Block - an American who got into the British spirit by appearing onstage dressed as James Bond after a themed video preceding his arrival - said the UK was the "hub of EMEA".

"We are absolutely committed to the UK and Ireland." he said. "A huge part of our strategy is international growth, international support, international success and international customer success. Over the past 12 months we have driven over $1bn (£654m) revenue in EMEA. We are super, super excited about that."
Thomas Volk, chief executive of Salesforce partner Lumesse - which is based in the UK and has offices across Europe and in the US and Hong Kong - said he is convinced by Salesforce's pro-European talk.

"I think they have a close commitment to Europe, especially in the UK, with the investment they made in not just the [UK] datacentre but the Salesforce Tower here and the investments in the non-profit world here," he said. "They are establishing themselves as a real global player here in the UK.

"When you look at the growth opportunities, they ensured a lot of growth in the US but if you look at their total business, there is only about 20 per cent [coming from] Europe, so that is under-represented for a global company. So from a business perspective, they see the incentive to do it."