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Apple AppStore Lessons for the CRM App Ecosystem

A few weeks ago, Apple released some important data about their AppStore:

  • AppStore revenue exceeded $28B in 2016
  • AppStore revenue grew more than 40% year over year
  • Sales of apps exceeded 90% growth in China in 2016
  • App developers received over $20B in revenue last year

Obviously the AppStore represents big business, and a massive revenue opportunity for companies looking to capitalize on the Apple ecosystem! When you consider that iPhone sales actually declined over the last few years, the massive growth of the AppStore becomes even more impressive. Apple continues to grow the value of their AppStore network, which in turns motivates more developers to create apps for the AppStore, which again increases the value of the network! Economists and other really smart people call this concept the network effect which basically states “a phenomenon whereby a product or service gains additional value as more people use it.”

NetworkEffect

While the AppStore numbers might get your interest, you might wonder what do $0.99 video games have to do with the enterprise CRM market?!?! We think that ISV’s (Independent Software Vendors) in the business software market should sit up and pay close attention to what’s happening in the AppStore…because the same network effects generating 40% year over year growth in the Apple AppStore will create that same growth within the two largest CRM ecosystems:

Salesforce and Microsoft Dynamics 365 represent two of the leading and largest CRM applications in the world. Each of these systems offer their own app stores that work similar to the Apple AppStore, they provide a streamlined and easy way for customers to find and purchase add-ons for their system. Here’s a quick comparison of AppExchange to AppSource:

 

AppExchange

AppSource

Ecosystem

Salesforce

Microsoft Dynamics 365 for Sales
Power BI
Office 365

Launch Date

2006

2015

Approximate # of Apps

~3,000

~380 total apps
~130 for Microsoft Dynamics 365 for Sales apps

App deployment

Cloud only

Cloud & on-premise offering

In-CRM App Marketplace

Yes

Yes

Customer reviews and scores

Yes

Yes

From this chart, you can see that the Salesforce AppExchange owns a longer history and a larger selection of apps compared to Microsoft’s relatively new AppSource. However, we think that the Microsoft AppSource offers great growth potential for ISV’s because its ecosystem extends beyond CRM into Power BI and Office 365…and both of these related Microsoft platforms have large numbers of customers and high growth rates!

Stephen Cummins presented some interesting tidbits about AppExchange revenue:

  • He projected that average app in the AppExchange would generate almost $1 million in annual revenue in 2016.
  • Neeracha Taychakhoonavudh (Salesforce’s SVP of Partner Programs) said Salesforce will boost AppExchange revenues 5X over the next 5 years.
  • The top-performing apps in the AppExchange like Veeva, Apttus and Docusign each generate hundreds of millions of dollars in revenue.

So what does all of this mean for ISV’s? We think that every single business software company ABSOLUTELY needs to have an integration or offering on the Salesforce AppExchange and Microsoft AppSource. With the continued growth of the CRM market, these CRM app ecosystems will start seeing significant network effects which will generate amazing revenue opportunities for ISV’s.  

If your company wants help developing a new app for AppExchange or AppSource, please contact Sonoma Partners. We can help you refresh an old app, or build a brand new one from scratch!

Topics: CRM Best Practices