The Salesforce OEM Program as a PaaS for Your Enterprise SaaS

In 2016, IDC highlighted the Salesforce platform as being 50% faster for application development, taking 59% less time to release new features, delivering a 7-month breakeven point on investment, over $55,000 of additional revenue per year, per 100 users and a whopping 478% ROI after 5 years when compared to other platforms (IDC, 2016). 

Despite this extensive recognition, Salesforce as a platform for developing new applications or re-platforming existing solutions is frequently overlooked in favor of more traditional IaaS and PaaS providers. If you’re interested in bringing your next million-dollar idea to market and capitalizing on the incredible return described by IDC and observed by many successful ISVs, then read on to make this a reality.

SaaS Application Development Titans

The development of a fresh new SaaS application to overcome industry and organizational challenges is as exciting as it is daunting for any budding entrepreneur, small business or established enterprise. Embarking on this journey from the ground up is the software architect’s equivalent of “Blank Page Anxiety” and is often accompanied by a question whose answer will form the foundation for almost every decision from that moment on; From the skills and expertise required to build the software, right through to a future go-to-market strategy. The question, of course, is which cloud platform will be used to develop, manage and host the application.

There’s no doubt that a few titans of the cloud computing industry first spring to mind when considering this question. Indeed, Amazon Web Services, Google Cloud Platform and Microsoft Azure have continued to retain upwards of 60% of cloud infrastructure services in recent years.

Cloud infrastructure services market share quarterly worldwide 2017-2023, by vendor (Vailshery, 2023)

To someone who has spent over a decade working in the ecosystem, conspicuous by its absence is arguably the world’s first SaaS business, Salesforce. Whilst renowned for its CRM, Customer360, e-commerce and industry-oriented solutions, online comparisons of cloud computing providers across the web consistently overlook Salesforce’s extensive application development capabilities, application marketplace and partnership program for independent software vendors (ISVs). 

This is despite the enormous success that many Salesforce ISVs have seen over the past two decades, which have been marked by tremendous growth, IPOs, and acquisitions. Indeed, Salesforce themselves have acquired several ISVs, notably the $1.3bn of Vlocity which has since been transformed into Salesforce Industries (Salesforce, 2020). What’s more, the Salesforce ecosystem is only expected to grow, and projections suggest that by 2026, for every $1 earned by Salesforce, the partner ecosystem will make over $6.

For these reasons, and many more, we at Aquiva Labs believe that there is enormous potential for organizations seeking to build brand-new applications or re-platform existing legacy products onto Salesforce’s modern, scalable cloud infrastructure.

Why Consider Salesforce as an Application Platform?

Technology Value Incremental Value TAM Value
Access to Salesforce Developer Experience (SFDX): Salesforce ISV partners benefit from using SFDX, which provides a comprehensive set of tools and resources for building, testing, and deploying applications on the Salesforce platform.
Dramatically reduce deployment time and friction, using Salesforce’s packaging infrastructure and Trialforce technology, for quickly spinning up pre-configured customer environments.
150,000+ pre-qualified SaaS buyers via the Salesforce ecosystem: Being a part of the Salesforce ecosystem opens up a vast market of potential customers already using Salesforce products. This can significantly reduce friction during the selling process for an ISV's applications.
No technology cost: Access to Salesforce platform technology incurs no initial cost for ISV partners.
Ease of customization and scalability: Salesforce’s metadata-driven platform, combined with options for ISVs to expose parameters and features enables sustainable customizations and tailored solutions that are future-proof and simple to manage.
Unrestricted customer base: Salesforce ISVs are not limited to just the existing Salesforce customer base. Via the OEM program, ISVs can use the Salesforce platform and sell to non-Salesforce customers.
Regular updates: Salesforce conducts releases to their features, frameworks and languages 3 times per year, giving ISVs and their customers access to modern, tooling and new capabilities.
Ecosystem Collaboration: Salesforce has a strong community of developers, partners, and customers. ISVs can tap into this community for collaboration and marketing opportunities, further enhancing their market reach.

Application Development with Salesforce

The Technology

For the uninitiated, Salesforce offers a robust set of application development tools at no cost to developers and organizations looking to build applications. These include the ability to define and use custom data models, develop code for backend and frontend use cases, integrate with external services and much more.

Introduced in 2006 (Songini, 2006), Apex has benefited from almost 2 decades of enhancements that empower developers to build complex backend processes, asynchronous tasks, callouts to external systems, database queries and these days processes billions of transactions every single day, catering to a wealth of use cases and industries. 

What’s more, Salesforce has expanded its platform capabilities with Lightning Web Components (LWC), a modern framework that leverages web standards for creating lightweight, modular front-end components. This framework adopts a familiar HTML, JavaScript and CSS approach to web development, providing interactive and responsive user experiences for users, aligning with modern web development practices.

The platform is also famous for its declarative development tool, Flow, which provides both front and backend customization options using a point-and-click builder. Additionally, Salesforce offers a host of other technologies to enable event-driven development, big data storage, mobile-first design and more.

Underpinning these technologies for ISVs, is Salesforce’s packaging technology. The latest iteration, known as Second Generation Packaging (2GP), enables developers to compile the metadata and intellectual property that makes their Salesforce application function, and install it into a Salesforce instance. 

The Market

Importantly, and perhaps little-known, ISV applications are not limited to being contained within an existing Salesforce customer’s environment. Instead, Trialforce empowers Independent Software Vendors to create a dedicated Salesforce instance for a net-new customer with the application, configuration and, optionally, data pre-configured to support the onboarding of non-Salesforce customers. 

In essence, a properly configured approach to Trialforce and the OEM model broadens a Salesforce ISV’s total addressable market (TAM) beyond the boundaries of existing Salesforce customers and enables them to operate as a vendor of software targeting any customer, in any industry, regardless of their current Salesforce adoption, using Salesforce’s freely available development and packaging capabilities. This is perhaps the most critically misunderstood element of Salesforce application development and, this author would guess, a key factor as to why Salesforce remains notably absent in articles discussing application development platforms across the web.

The AppExchange

Salesforce’s AppExchange marketplace is home to thousands of enterprise applications, both large and small and has, at the time of writing, supported almost 13 million installations of applications and is “the world’s leading business app marketplace” (Salesforce, 2024).

What’s more, over 90% of Salesforce customers have installed at least one AppExchange application (Forrester, 2023), demonstrating the efficacy of Salesforce’s application platform.

The Programs

Salesforce partnerships for paid applications generally take on two distinct flavors: ISVForce and OEM. 

ISVForce is the model most in the ecosystem would first think of. The model allows ISVs to sell into existing Salesforce customer environments and mandates a 15% revenue share to Salesforce for each sale*.

OEM, on the other hand, opens an ISV’s TAM beyond the existing Salesforce customer base and allows ISVs to distribute an embedded Salesforce license with their application, such that users can log in to a Salesforce environment for the purpose of using the application. In many cases, users of this application may be entirely unaware that they are using Salesforce, as the vendor acts independently, using the Salesforce platform as a mechanism to build and deliver their own intellectual property. In these cases, OEM partners pay a 25% revenue share to Salesforce for each sale*.

It’s important to note that an OEM’s access to Salesforce is intended purely for the purpose of accessing the ISV application and therefore does not expose Salesforce’s core CRM capabilities. Instead, there is a restricted set of objects and features that an OEM partner can make use of and are found in the OEM User Licence Guide (Salesforce, 2024)

*As an ISV grows and thus increases revenue contribution to Salesforce, the percentage net revenue (PNR) share decreases in line with the order value below (Correct as of March ‘24)

Marginal PNR (Salesforce, 2023)

Getting Started

Given the extensive benefits Salesforce provides, and the organization’s small penetration of the cloud infrastructure market when compared to peers in Fig 1, many OEMs have been able to capitalize on the competitive advantages the platform provides, such as Newmarket who saw great success providing hotel industry solutions on the Salesforce platform and were ultimately acquired for $500M (Amadeus, 2013). With this knowledge in mind, you’re no doubt keen to get started building your SaaS application, or even re-platforming your legacy solutions into the Salesforce ecosystem, but where does one begin?

Firstly, Salesforce provides an abundance of knowledge and guidance on their online learning platform, Trailhead (Salesforce, 2024) and in their Partner Community. Signing up to the Partner Community gives prospective ISVs access to their very own Partner Business Org, a free Salesforce instance with 2 Sales Cloud licenses, which can be used to create free developer edition environments “Dev Orgs”. Creativity can run wild inside a dev org, and developers can familiarize themselves with Salesforce technology in a safe environment. From here on, we recommend familiarizing yourself with SFDX, packaging and AppExchange via Partner Community and Trailhead resources.

That said, despite the wealth of benefits listed herein, the development of any enterprise application should not be taken lightly. Salesforce recommends the use of an application development partner, known as a Product Development Outsourcer (Salesforce, 2024), who specialize in application development and understand the nuances of packaging, distribution, Trialforce, OEM vs ISVForce, licensing, revenue share and more. As one of the largest and most experienced PDOs, Aquiva Labs has completed over 150 PDO projects, and has many ecosystem veterans ready to help you on your journey.

Get in touch below to learn more!







Written by:

Picture of Michael Holt
Michael Holt

Head Architect, PDO Practice

References

Amadeus. (2013). Amadeus accelerates move into Hotel IT sector with USD 500m acquisition of Newmarket International. Amadeus. https://corporate.amadeus.com/en/newsroom/amadeus-accelerates-move-into-hotel-it-sector-with-usd-500m-acquisition-of-newmarket-international

Forrester. (2023). Salesforce AppExchange Positioned as a Leader in SaaS Marketplaces Analyst Repor. Forrester. https://appexchange.salesforce.com/appxContentListingDetail?listingId=a0N3u00000RgeTOEAZ#:~:text=
%2D%20AppExchange%20is%20a%20trusted%20marketplace,least%20one%20app%20from%20AppExchange.

IDC. (2016). The ROI of Building Apps on Salesforce. IDC. https://a.sfdcstatic.com/content/dam/www/ocms-backup/assets/pdf/misc/IDC-ROI-of-Building-Apps-on-Salesforce.pdf

Salesforce. (2020). Salesforce Signs Definitive Agreement to Acquire Vlocity. Salesforce. https://www.salesforce.com/news/stories/salesforce-signs-definitive-agreement-to-acquire-vlocity/

Salesforce. (2023). Marginal PNR. Salesforce. https://partners-salesforce.relayto.com/e/fy24-partner-program-benefits-appexchange-isv-track-7ds0n2y621nx5/1yPA7twP20

Salesforce. (2024). OEM User License Guide. Salesforce. https://developer.salesforce.com/docs/atlas.en-us.packagingGuide.meta/packagingGuide/oem_user_license_comparison.htm

Salesforce. (2024). Product Development Outsourcers. Salesforce. https://appexchange.salesforce.com/mktcollections/curated/pdo

Salesforce. (2024). Run your business with the world’s leading business apps marketplace. Salesforce. https://www.salesforce.com/uk/solutions/appexchange/faq/

Salesforce. (2024). Trailhead | The fun way to learn. Salesforce. https://trailhead.salesforce.com/

Songini, M. L. (2006). Salesforce.com to roll out ‘Apex’ programming language. ComputerWorld. https://www.computerworld.com/article/2547363/salesforce-com-to-roll-out–apex–programming-language.html

Vailshery, L. S. (2023). Global quarterly market share of cloud infrastructure services from 2017 to 2023, by vendor. Statista. Retrieved 03 22, 2024, from https://www.statista.com/statistics/477277/cloud-infrastructure-services-market-share/

 

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