Salesforce.com Inc. went live this week with a heavily publicized major update, adding a new platform called AppExchange for easily deploying third-party applications to extend the functionality of Salesforce.com’s CRM (customer relationship management) system.

Salesforce.com upgrades its on-demand, hosted sales and customer service software system three times a year, but this week’s Winter ’06 release is a substantial overhaul.

In addition to AppExchange, Salesforce.com also went live with a new user interface (customers can opt to preserve the old one), a premium Sandbox feature that allows customers to create testbed replicas of their deployments, and tweaks to its Outlook and Offline editions, among other changes.

Salesforce.com rolled our the new system to its 351,000 subscribers over the weekend, and a media day is scheduled on Tuesday in San Francisco, Salesforce.com’s hometown, to formally launch the new features.

The update comes just a few weeks after a widespread, daylong outage that drew customer ire and invited questions about Salesforce.com’s ability to scale its infrastructure well enough to keep pace with its rapid growth.

Internally managed applications are hardly immune from outages, but having software run by an outside “software-as-a-service” vendor like Salesforce.com leaves customers in the frustrating position of having no control over repair progress during outages and of relying on the vendor to provide information and status updates.

Salesforce.com struggled with that during its Dec. 20 outage. It has since taken steps to improve its customer communication, posting a “mea culpa” note following the crash and introducing a system status page. Right now, only customers paying for premium support have access to the status page, which remains in beta testing.

This week’s upgrade sparked a handful of glitches and bugs, but no major disasters have been reported. Yearmovie Inc. Chief Executive Officer John Burgess, whose company began using Salesforce.com several months ago for around a dozen employees, said he encountered a spate of “server busy” and “page not found” errors early in the week, but felt things were running smoothly by Wednesday.

“There are always going to be things that pop up [in a software overhaul],” Burgess said. “It was nothing that brought our business to a halt.” Yearmovie is a DVD yearbook production company with headquarters in Springfield, Missouri.

Salesforce.com’s biggest advance, AppExchange, is aimed at broadening the company’s network of partners and addressing customer demand for deeper functionality.

Salesforce.com concentrates on sales, marketing and customer service features. For industry-specific customizations, human resources management tools, accounting packages and other software outside Salesforce.com’s specialty, it relies on ISVs (independent software vendors).

AppExchange is a showcase intended to help ISVs reach Salesforce.com’s customers. It’s also a platform for seamlessly integrating those applications with Salesforce.com’s system. Customers can activate AppExchange products with a few clicks and work with the new software from directly within their Salesforce.com system.

SchoolDude.com Inc. Accounting Manager Scott Bailey turned to AppExchange, which was launched in a “preview” mode earlier this year, when his company decided to go shopping for a more robust accounting system to replace QuickBooks. He settled on software from Intaact Corp., which offers order management and other financial tools.

“Salesforce.com integration was definitely a factor in our decision,” Bailey said. “We use [Intaact] for our order-entry process. The integration eliminates a lot of double-entering and gives us visibility between departments.”

SchoolDude.com is a Cary, North Carolina, company that offers online tools for managing educational facilities. It has been a Salesforce.com customer for three years and has around 30 users on the system. Bailey’s colleague Donna Taylor, a company developer, said she expects to continue digging through AppExchange for useful Salesforce.com extensions.

Not all of AppExchange’s modules carry fees; Salesforce.com has seeded the system with several dozen applications it developed and offers for free. One of those, a commission tracker, looks like it will offer functionality Taylor expected to have to develop from scratch, she said.

Salesforce.com’s executives plan to use Tuesday’s launch event to further discuss AppExchange. Analysts are also hoping to hear more about the company’s recent outage problems and plans for handling the issue.

For customers, especially large ones with enterprise licensing arrangements, the public relations debacle could be a powerful stick: In a recent research note, SG Cowen & Co. LLC’s analysts noted that most of the customers they talked to “expected the downtime to weigh in their favor for pricing in subsequent subscription renewal discussions.”



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