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Multitenancy and the network effect

October 03, 2007

In an intriguing blog post yesterday, Salesforce.com began soliciting its clients' help in coming up with a name for a possible "new service enabling companies to share leads, opportunities and custom objects with each other (assuming both are using salesforce.com)."

Clearly, the company has something cooking, and I think it points to an as yet under-appreciated advantage of the multitenant systems that Salesforce and other utility-computing firms are running: the ability for companies using the systems to easily exchange data with one another. Such exchanges have always been cumbersome (think EDI), and that's hindered the automation of supply chains and distribution networks. But with two or more companies using a shared multitenant system, data exchanges become checkbox simple - a matter of granting permissions, setting rules, and subscribing to feeds. Corporations can start exchanging data as easily as individuals share information in a multitenant social network like Facebook.

Up to now, companies have tended to worry about the downside of shared systems, particularly the possibility of unintended data leaks. What they haven't focused on is the beneficial flipside: the ability to easily program data exchanges with partners. If Salesforce's blog post is any indication, the company is likely prepping a set of tools that will build cross-client data sharing into its applications - in a way that goes well beyond its current "partner relationship management" add-ons.

For Salesforce and other multitenant vendors, the big payoff would be the creation of a strong network effect. As companies begin trading data within a system, their partners would have a big incentive to join the system as well. At some point, a critical mass might be reached, setting off a snowball effect. Of course, where there's a network effect, there's also a lock-in effect. Convenience has a price.

The current leading candidate for the service's name, by the way, is Salesforce to Salesforce, or S2S.

Posted by nick at October 3, 2007 10:14 PM

Comments

Nick,

This is an idea that vendors have been playing with for quite some time.
Most (if not all) recruiting solutions are now hosted multi-tenant applications (Taleo, Hiredesk, Peopleclick, ...). Most of them have discussed the possibility of creating a pool of candidates that would be accessible by all their customers. These discussions generally took place around 2001-2003. All of them who started talking to their customers faced firm resistance from those customers.
Maybe the market was just not ready at the time (4 years ago! The Dark Ages)

That said, in the same area (recruiting) there have been initiatives where all customers in the same industry accepted to share some metrics so as to create an industry benchmark.
It will be interesting to see if those companies will re-kick-off those initiatives now that the world is more used to Innocentive, Wikinomics and the likes ....

Posted by: Romuald at October 4, 2007 12:50 AM

Nick

this is, indeed, an interesting opportunity. From our perspective at Talis, it is benefits like these that lie behind the decisions we're making in developing the (multi-tenant, but also distributed) Talis Platform - www.talis.com/platform/ - and its underpinning with semantic technologies such as RDF.

Posted by: Paul Miller at October 4, 2007 11:51 AM

“We have a very stealthy project, very important, but shush: we are just hear to give it a name, not to start a buzz about it—at all, not in the buzz-prone blogosphere, at least. . .”
Billinger has a very good paper on what could be the consequence of that, based on a real case.

Posted by: Bertil at October 5, 2007 03:59 AM

Multitenancy and the network effect

October 03, 2007

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