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When you think “App Store,” you think Apple. But Marc Benioff owned the idea first, and has been quietly cultivating his version into a billion-dollar industry over the past decade.
Salesforce.com, the biggest of the pure cloud software companies, is best known for two things: Its high-profile founder and CEO, Marc Benioff, and the application itself, widely used by thousands of companies to track sales processes.
But over the last decade it has also become known for the AppExchange, a collection of third-party business-specific apps that Salesforce customers can download to enhance how they use the core product. Sometimes, those apps are intended for other things entirely and are the basis for their own standalone businesses.
Today marks the 10th anniversary of the AppExchange, and to understand what it has become is also to understand Salesforces’s drive to own the cloud era of business software.
Salesforce has used its substantial cloud infrastructure resources to allow other companies to build their own applications, and in the process made itself essential to their existence. Take Veeva Systems, which sells apps aimed at the life sciences business: It grew so fast that it went public in 2013 and is expected to finish its 2015 fiscal year with revenue north of $400 million. Another is ServiceMax, whose app helps field service reps do their jobs more efficiently, and which could realistically go public in its own right in the near future.
There are some 2,800 apps available in the AppExchange, which has logged about 3.3 million downloads. And while that doesn’t sound like many — downloads from Apple’s App Store number in the tens of billions — a single app download by a company may be deployed to thousands of employees.
While some apps are free, many carry a subscription fee, generating what Salesforce estimates to be total revenue of about $1.5 billion a year. Its cut averages about 15 percent, about $225 million or about 4 percent of Salesforce’s revenue in the fiscal year just ended. The goal, says Salesforce’s Senior VP for Partners Neeracha Taychakhoonavudh, is to boost that 5x within the next five years, which would in turn raise its cut of the action to north of $1 billion.
It’s a long way from the days when Leyla Seka, now the senior VP and general manager of Salesforce’s Desk.com service, first joined the company. “There was this cottage industry forming around our application, enhancing it and customizing it in all these interesting ways,” she said. “Marc saw what was happening and came up with the idea, and it all evolved very naturally.”
At the time the concept was a new one. Apple hadn’t yet launched the iPhone and so was more than a year away from launching its own App Store. (Benioff filed for the “appstore” trademark, then gave it to Apple’s then-CEO Steve Jobs as a token of appreciation.)
“When I first joined, my title was director of the app store,” Seka said. “We didn’t know what that even meant yet.” Now we all do.
This article originally appeared on Recode.net.
