I too am impressed with the AppExchange program that Tien commented on, and believe it to be an important step for enterprise software.

For those interested in even more ambitious approaches to software, I read a rather interesting article describing Charles Simonyi's plans to commercialize meta-programming.  Simonyi, who Bill Gates called "one of the great programmers of all time", is developing what he calls "intentional software" that will allow "regular" industry specialists (from doctors to accountants) to control their own software, rather than going to the programmers (who know little about the specific field) to rework the code.  While I know nothing about the details of meta-programming theory and plenty of skeptics do exist, it seems that it's at least worth keeping your eyes on if you're interested in the future of AppExchange and enterprise software.   

The full article is available at:
http://www.technologyreview.com/Infotech/17969/

I'd be curious to hear if anyone else has other information on Simonyi's project or efforts.

I'd like to add to what the above poster said in terms of how businesses are increasingly offering an on-demand server client version of their existing products. Office live is the first step taken by Microsoft in this direction. As Tien pointed out, the internet has revolutionized the way business takes place by shortening sales cycles and by eliminating boundaries. It is incumbent upon companies to react to this significant and powerful change in the business environment and suitably alter their product offerings to harness the competitive advantages that such a business model offers.

Again, the app exchange is a very novel concept that other companies should take inspiration from as while allowing customers to actually build customized applications around the company's product, a platform like the app exchange brings the customer closer to the product and instills a feeling of ownership on the product. This, I feel, will go a long way in improving customer relations and loyalty.

I agree with Alice regarding the response we'll see from companies such as Microsoft. We see the transition already from apps like MS Office to online programs such as Google's docs and spreadsheets. PC Mag had an article about the prevalence: it's not just Google creating this projects, they are becoming more ubiquitous and have their advantages with regards to collaboration. In corporations, people rely on Media Wiki more and more and away from corporate solutions for the same functionality.

Yet despite it, even if Google comes out with their online operating system, there will still be the inscentive to purchase corporate solutions. Linux hasn't become popular because of its lack of support for the mass user. Sure, comparing Linux or the Unix revolution with the Google Docs and Spreadsheets is unfair since Google does provide support for their product, but the volatility of the internet and it's ability to be maliciously exploited creates more support issues, etc. Thus, whereas we are seeing a transition, I don't think it'll be an all-or-nothing event.

Interesting points.

What I think is really interesting about their application is the membership model.  While it's true once a company fully adopts and wraps its business processes around the app, they've essentially got a perpetuity of revenue but before that point and especially is less rigid organizations, they have to prove their worth to the customer each and every month, driving them hard to show how their app can create value for the customer.  After sales service takes on a whole new meaning when there is no actual sale. I think the App Exchange is a great way to create more value for clients thereby decreasing churn, I wonder if the incentives for a traditional software company would have allowed for a similar initiative to develop.

I agree with Alain.  In an industry where technology is so crucial, it is interesting that so much is spent purely on marketing.  This makes me truly question the future of this organization.  It seems to me tha it will not be long before they fall behind their competitors because they are not concentrating on the crucial technology elements of their business.

I think that the focus on marketing spending being a high percentage of revenue is misguided. In order for SalesForce.com to compete against big name incumbents like Oracle, they need to really work hard on marketing. Marketing in order to take market share away from the likes of Oracle is VERY expensive, whereas programming improved products is relatively inexpensive. Thus, especially in the early stages, seeing 80% spending on marketing is to be expected.

I think the higher marketing budget is largely justified. Salesforce is competing with two different paradigms of traditional software sales. On one hand they have companies that pursue critical mass and large scale volume, sold primarily through highly organized distribution channels. On the other hand they face well funded direct sales teams that are able to extract massive amounts of consulting revenue along with their traditional software sales. Considering Saleforce’s delivery model, distribution and end-user adoption becomes the critical defining point for driving the company. I think once Salesforce is able to achieve some semblance of a “critical-mass”, it will eventually be able to shift its resources more and more towards engineering, since it’s visibility in the marketplace is already a given.