Microsoft and Salesforce.com Global AllianceAfter the article we published yesterday, a number of people have asked what the Microsoft/Salesforce global partnership announcement might mean for Salesforce and Microsoft as companies (rather than as CRM products).  Financial details of the deal were undisclosed, so we can only speculate.  Here are a few quick thoughts for discussion:

SALESFORCE

  • It is well documented that Salesforce.com needs money.  Although they have done a great job of developing and selling a CRM product line, they have made a number of questionable decisions both financially and in their sales approach (a recent Salesforce fan remarked to me, "it's easy to think that Salesforce could be the next Enron" - and, indeed, it is also easy to compare Marc Benioff to Kenneth Lay).  If that kind of commentary is coming from those who believe in Salesforce, you can imagine what a cynical financial market is thinking when they see these numbers: And some details on Salesforce financials: http://leontribe.blogspot.com/2014/05/salesforce-newtons-first-law.html.   So, the immediate return for Salesforce is probably a cash infusion from Microsoft of some sort.

     
  • Longer-term: this partnership reminds me a bit of Bill Gates investing in Apple many years ago.  If Salesforce can survive and rethink the cost structure of their business, they will likely remain a worthy competitor.

  • Will Salesforce.com go under?  It's very unlikely that Salesforce will truly go the way of Enron and completely disappear.  But it is certainly possible that Salesforce as a company will eventually need to sell itself to another competitor in order to survive. In no event would I expect the Salesforce product to disappear - it is simply too solid and too good of an investment (at the right time) for someone to acquire.

MICROSOFT

  • As noted in the article, from the Microsoft standpoint, this partnership is about reinforcing its core businesses where it has either lagged behind the competition, or has seen erosion.  I think you will see partnerships like this make an incremental impact on sales of Office (Office 365 and the product suite - long a cash cow for Microsoft) and platforms (the Windows Operating System and related hardware from Microsoft and their partners). 

  • To a lesser extent, this will shore up some areas where Microsoft was very late to the game.  Cloud offerings (Office 365 - which includes a boost to CRM Online sales), OneDrive, SharePoint - are key in this area.  But also mobile devices (tablets and mobile phones) - where Microsoft is running a distant third.  Will this (and, possibly, other partnerships) be enough to propel Microsoft to the #1 position in these areas?  Probably not.  But if it helps them make incremental gains, it puts Microsoft in a position to play a waiting game and gradually take more market share in those areas - a game that Microsoft has proven itself to be fairly strong in.

FOR THE CRM INDUSTRY OVERALL

My personal belief is that Salesforce has created some unnatural forces in the CRM marketplace.  In order to stay competitive with what Salesforce is doing, Microsoft has had to make some surprising acquisitions.  Will the acquisitions made by Salesforce and Microsoft ultimately be good for the industry and the products overall?  My personal opinion is that these will not result in delivering the best product to the customer.  A company focused on developing a CRM product is not likely to make investments in expanding ancillary add-on products – that is better left to third parties.  Let’s look at two examples:

  • Jigsaw (now data.com) was acquired by Salesforce a number of years ago as a sales intelligence tool.  At the time, it was the most powerful tool on the market.  Other than renaming the product and integrating it with the Salesforce product suite, the product then stagnated.  In fact, because it was so closely associated with Salesforce.com now, it probably didn’t enjoy adoption among other CRM users the way that it otherwise would have.  Then along came companies like InsideView and Netprospex, which quickly surpassed the capabilities found in data.com.  But the Salesforce move forced MIcrosoft’s hand, and Microsoft developed an alliance with InsideView to compete.  While the moves by Salesforce and by Microsoft were both good for their customers in the short-term, it resulted in products that may now be more aligned with individual solutions – and as a result may not get the same innovative new features that they would have otherwise.

  • MarketingPilot (acquired by Microsoft and now called Dynamics Marketing) and ExactTarget (acquired by Salesforce) – both are enterprise marketing tools.  Again, both acquisitions appear to be a short-term boon to users of the individual CRM platforms.  Both organizations are integrating these tools with their solutions in a way that significantly accelerates the marketing functionality beyond what was previously available.  But expect their attention to drift to other areas and for their marketing functionality to fall behind (just as it had up until about a year ago) as the marketplace identifies important new marketing CRM functionality.  Meanwhile, third parties will now have little incentive to develop competing products, because they simply cannot compete against the built in functionality.  So as the focus of Salesforce and Microsoft drifts to other areas (as it must), not only will their marketing features begin to lag, but there will be no new competitive offering to take their place for a long time.

Does this mean that you shouldn’t avail yourself of these great new offerings by both companies?  Of course not – right now they’re the best decision you can make if you need those features.  But it does mean that, longer-term, you will likely be frustrated when you need a new capability and it takes years for it to be added to the solution that you’re using … with no integrated third party offerings available either.

So my personal hope is that this partnership will help Salesforce to rethink their financial, acquisition, and sales strategies.  It would be great to see Salesforce become a solid and profitable competitor.  And it would be great to see a flourishing market of third party tools that integrate with BOTH of these great CRM tools (and others too).