Anne Truitt Zelenka

What if Salesforce.com were able to create a thriving online enterprise application marketplace with its AppExchange? Now that they’ve announced Apex, it looks like that’s their target.

However, though Salesforce might create a thriving market of Salesforce extensions, they may have little chance of creating a more broad-based online application infrastructure and market. Why? Because of The Innovator’s Dilemma, described by Clayton Christensen. That dilemma is that established and successful firms find it difficult if not impossible to successfully deliver innovations that disrupt their own business model.

Salesforce.com will very likely deliver what Christensen calls “sustaining innovation”:

Sustaining innovation is an innovation that brings to market a product or service that a company in the market could sell for higher margins to its best customers. In other words, sustaining innovation brings a better product into the market. Some sustaining innovations are simple, incremental, year-to-year improvements. Others are dramatic, breakthrough technologies the transition, in telecommunications, from analog to digital, and digital to optical. They were a real technological tour de force, but their effect on the service was to bring a better product into the existing market that could be sold for higher margins to the best customers of the leaders.

A disruptive technology, on the other hand, radically reshapes the market by introducing a new product that eventually makes the old one, the one produced by established competitors, obsolete. Often, the disruptive technology starts out with low-end opportunities that aren’t of interest to more established companies. From there, it improves over time until it meets the needs of the high-end company’s customers.

Established companies depend upon their current value network for their survival. Their success is dependent upon having created an organizational context for delivering real value to their existing customers. An organization that has succeeded in this way will find it difficult if not impossible to justify and support investing in disruptive, risky, uncertain ventures. People and groups within the established company will rebel against what they see as excessive and dangerous forays into markets that don’t offer the rewards that they’re used to.

Salesforce.com, a company that has found success in providing hosted customer relationship management solutions, will likely be able to increase their value to existing customers by offering more and better ways to expand upon hosted CRM. This may include creating a thriving marketplace and ecosystem for developers who build solutions that integrate with Salesforce’s own CRM offering. Sinclair Schuller’s recent analysis of what’s available on AppExchange supports this–it’s an architecture for Salesforce plugins and extensions, not a platform for generic, hosted application development.

A more broad-based marketplace of enterprise applications, to include financial or inventory management or human resources apps, would not only threaten the core Salesforce offering, but would also require a daunting investment of money and attention to get off the ground. Salesforce comes at it from the standpoint of trying to make their scale of applications possible, by aiming at what, from their perspective, looks like a worthwhile market to enter. They have chosen a programming language for their offering that emphasizes scalability, safety, and industrial-strength database performance. From their perspective as a supplier of hosted enterprise-strength salesforce automation, this makes sense. But it leaves open the possibility that disruptive toddler startups offering drag-and-drop GUIs or Ruby-enabled scripting stacks will grow into six-foot-tall teenage SaaS platforms who eat everything out of the enterprise application refrigerator.

Do-it-yourself web app startups have nothing to lose by investing money and time in creating an application marketplace. They don’t risk their current business; they have no current business. They don’t have to offer superior performance or worry overmuch about protecting their core online offering from poorly-written code. I’m looking to those startups to create successful generic enterprise app marketplaces… and then maybe they’ll get acquired by someone like Salesforce or Oracle.