How Salesforce quietly became a launching pad for other companies

Marc Benioff, chairman and chief executive officer of Salesforce.com, speaks during a keynote address during the DreamForce Conference in San Francisco.
David Paul Morris | Bloomberg | Getty Images

It's been called the Woodstock or Lollapalooza of cloud technology. This week more than 170,000 people will flood into San Francisco to attend Salesforce.com's annual customer conference Dreamforce, which starts Tuesday.

Two of the event's top sponsors — start-ups Apttus and FinancialForce — illustrate how Salesforce has become such a vital force in technology, despite not being as well-understood by the general public as some of its peers.

The key point is that these start-ups, and dozens of others, effectively owe their success to Salesforce. And unlike some other start-ups with billion-dollar valuations, they can afford the sponsorship: These companies are quietly generating a lot of cash.

Apttus, a so-called quote-to-cash company that helps businesses draw up price quotes and contracts, and ultimately get customers to sign on the dotted line, is on track to generate revenue of $150 million this year, and more than $250 million in revenue next year, said CEO Kirk Krappe

Meanwhile FinancialForce CEO Jeremy Roche said his company will approach a $100 million revenue run rate by the end of the year. The company sells enterprise resource planning (ERP) apps that help customers with supply chain, human resources and product management.

Apttus CEO Kirk Krappe, Salesforce CEO Marc Benioff, Apttus VP Mahesh Baxi, Apttus CCO Kent Perkocha and Apttus CTO Neehar Giri
Source: Apttus

Apttus and FinancialForce were two of the very first companies to offer business applications through Salesforce's AppExchange online marketplace, which launched in 2006.

Salesforce takes a fee from the companies whose paid apps are installed by its customers through the AppExchange. In return, it provides the infrastructure needed to run a cloud-based business, and access to its customers.

The strategy has proven so successful that both companies are aiming for the stars. Krappe plans to take Apttus public in the first half of 2017, and Roche said he wants to disrupt the legacy enterprise software giants. "My goal is to build the next SAP or Oracle," Roche said.

FinancialForce CEO Jeremy Roche plays DJ
Source: FinancialForce

Apttus and FinacialForce are part of a cohort of companies Salesforce.com partnered with — and invested in — early on. The two CEOs have since flown around the country with Salesforce Chief Executive Marc Benioff to meet with that company's customers, they have partnered on deals together and last week met for breakfast ahead of Dreamforce.

"I have worked on other ecosystems where it's much more of a dog-eat-dog world — Salesforce is more fun," said Roche.

There are pros and cons to hitching your business to Salesforce.com in this way. On the plus side, these companies do not have to worry about investing in the cloud themselves, saving millions of dollars. This allows them to focus on building the best possible products and scaling their businesses.

When Salesforce develops or acquires new technology, it is available to partners to integrate. For example, when Salesforce launched Chatter — an enterprise version of Facebook and Twitter combined — FinancialForce was able to integrate the feature into its apps within days, said Roche.

"It brings the apps alive with conversation and that really sets it apart from any other thing that's come before," said Roche.

On the down side, some customers have complained that Salesforce.com is expensive, which makes Apttus expensive, said Krappe. And should Salesforce.com take a turn for the worse for whatever reason, it could drag its 3,000 partner apps down with it.

Also, with so many apps competing for attention, the AppExchange has gotten competitive: Though Salesforce.com accounts for about 80 percent of Apttus' installed base, competitor Microsoft Azure, which accounts for the remainder, is driving more growth, said Krappe.

Early on, the biggest risk was that Benioff might get fed up with the platform if it didn't take off as ambitiously as he thought it should, said Roche. That, of course, did not happen and so far, a rising tide is lifting all boats — the AppExchange has driven more than 4 million app downloads to date.

Salesforce.com has forecast revenue of $8.33 billion for the year ending in January.