On May 29, 2014, Satya Nadella (CEO of Microsoft) and Marc Benioff (CEO of Salesforce.com) held a joint conference call announcing a global strategic partnership between the two firms.  Details of the announcement can be found at the following links:

PR Newswire release

Full transcript

Call audio

Microsoft community announcement

Salesforce press release

As one of the very few organizations certified on both platforms and providing in depth books and digital training on both platforms, C5 Insight is uniquely qualified to comment on this announcement and what it might mean for the customers of both products.  So what has the scuttlebutt been around our office and among our clients on the topic?

What it Means for Salesforce.com Customers

Our first reaction was to say, “it’s about time!”  Salesforce.com has long lagged behind Microsoft CRM in their integration with Outlook and other Microsoft products. 

For one client looking for insight into the best CRM product, we provided an exhaustive 2-day side-by-side hands-on experience to 8 managers, 17 sales people and 2 IT administrators.  At the end of the session, the group rated both products very highly, but gave a significant edge to Microsoft CRM in their Outlook integration rating (whereas Salesforce.com received a significant edge in the administration area).  But, in the end, they overwhelmingly chose Microsoft Dynamics CRM as their first choice simply because of the Outlook integration.  In the words of one participant, “it takes so much more effort just to track an email thread in Salesforce that, when I think of how much time each of us spends doing that, it’s a showstopper for Salesforce.com.”  Since the time we had that engagement, Microsoft CRM’s Outlook integration has improved, while Salesforce.com’s Outlook integration has actually become outdated (working only with older versions of Outlook unless you pay for a separate Outlook integration product).

Outlook remains the standard for email management - so the enhanced Outlook integration, alone, will be a significant boost for Salesforce.com users.

But the integration will go deeper than that.  Salesforce.com has agreed to integrate not just with Outlook, but also with OneDrive, Office 365, Windows Phone, Windows 8.1 and Excel.  Let’s break these apart a bit to understand what this will likely mean:

• Windows Phone and Windows 8.1 Integration with Salesforce1: As you may have noticed in the press release, it was pointed out that this integration will be with “Salesforce1.” Salesforce1 is the latest release announced by Salesforce, with a great deal of emphasis on mobile devices.  The Salesforce integration with Windows Phone and Windows 8.1 will focus on the mobile and tablet interface.  Windows Phone has established itself as the third player in the mobile phone space (after Apple and Android devices), so it is important for Salesforce to support their customers who use these devices.  And, in spite of a slower than expected adoption of Windows 8, the operating system will continue to evolve and is here to stay.  Dynamics CRM customers are already benefitting from an outstanding Windows 8.1 application, and it is important that Salesforce.com keep up in this area.
  
  
• Office 365, Office 365 for iPad, OneDrive and SharePoint Integration with Salesforce.com: Although Salesforce.com has long positioned their platform as a complete collaboration and content-management solution, they have not established themselves as a dominant player in that space the way that they have in the CRM space.  In the past, they have attempted to partner with Google to compete against Microsoft in that area, but Google has not gained the broad adoption for their office applications and file sharing capabilities that Salesforce.com was hoping for.  With Office 365, SharePoint and new Office for iPad, Microsoft remains the dominant player for these capabilities.  Providing direct integration with these tools within Salesforce.com means that customers will be able to choose whichever CRM solution that they prefer and have full integration with the industry standard collaboration, file sharing and content management platforms.  And this integration will be available on the platform of their choice (Windows desktop, Windows 8.1 tablet, Windows Phone, iPad, OS/X desktop, etc).
  
  
• Microsoft Excel Integration with Salesforce.com: Big data and business intelligence have been industry buzzwords for a while now.  In spite of all the amazing tools that have emerged in this space, Microsoft Excel remains the worlds most popular data analytics and business intelligence tool.  With Microsoft’s recent investments in expanding Excel to work online through SharePoint, adding Power BI for advanced analytics, and other tools that integrate with Windows 8.1, Excel is being used as the reporting and analytics tool of choice for finance, marketing, human resources and business analytics departments worldwide.  Dynamics CRM has long included direct integration with Microsoft Excel, and Salesforce.com could not afford to be left behind in this area.  This integration will mean Salesforce.com customers will have another analytics tool – in addition to the already very powerful report writing and dashboard capabilities of Salesforce – to make higher-quality decisions faster than ever before.

In Other Words: This means that existing Salesforce.com customers will experience much better performance and ease-of-use because their CRM system will soon integrate with their Outlook, their desktop applications, their collaboration and their file sharing systems.  And, for those selecting a CRM solution, it means you won’t be limited to Dynamics CRM if your team requires this integration.

When Will All of This Be Available?  Well, it looks like there is a planned beta release in the fall and a full release in 2015.  As these things go, I would expect several iterations before everything is fully released and integrated.  So, Salesforce.com users, you probably have 12 to 24 months to go until you are totally integrated with Outlook, Office 365, Windows Phone, Windows 8.1, OneDrive and Excel.  Hang in there!

What it Means for Microsoft Dynamics CRM Customers

If taken at face value, this partnership means very little for Microsoft Dynamics CRM users.  The arrangement is clearly about retaining and expanding the users of Microsoft’s core operating system, desktop application and device investments.  But let’s go a little deeper than face value…

The competition between Salesforce.com and Microsoft Dynamics CRM has ultimately always been very good for the users of both systems.  It has forced both organizations to fill gaps in their offering and to add innovative new capabilities to their systems.  Salesforce.com is certainly one of the top 2 or 3 companies that pushed Microsoft to invest heavily in the cloud – and now Microsoft customers derive great benefit from all of the Office 365, CRM Online, OneDrive and other online offerings.  For the next year, Microsoft will retain leadership in CRM integration with Outlook, but they know that they will be losing that edge in the future.  How might that inspire them to further innovate?  Let’s look at past, present and future expectations.

• Past: In the last year, Microsoft has significantly refined Dynamics CRM.  Until recently, our clients have rated the user interface of both products at about the same level.  With the release of the new user interface, Microsoft  has likely moved ahead of Salesforce in that category (we don’t have analytical information on that yet, but early signs are that  users find the new UI easier to adopt).  Getting sales and call center personnel to follow consistent processes without requiring extensive training has long been an issue with CRM systems – with Guided Processes, Dynamics CRM has taken a significant leap ahead of Salesforce.com in this area.  And the introduction of Yammer has helped Dynamics CRM to keep up with the social capabilities available to Salesforce.com users via Chatter.  Lastly, Microsoft entered an alliance with InsideView in order to meet or exceed the sales intelligence capabilities available to Salesforce.com users via Data.com.
  
  
• Present: Microsoft is only days away from completing the rollout of their Spring 2014 update of Dynamics CRM.  This will leverage acquisitions of MarketingPilot (enterprise campaign management software, now rebranded as Dynamics Marketing and integrated with Dynamics CRM), Parature (contact center software, now integrated into CRM and offered as an extension to CRM for certain capabilities) and NetBreeze (social listening software, now rebranded as Social Listening and offered free to CRM Online Professional licensed companies).  These investments will help Dynamics CRM to catch, and even surpass, Salesforce.com’s capabilities found in their offerings. 
  
  
• Future: But even with these past and present investments into Dynamics CRM by Microsoft, Salesforce.com remains ahead in some key areas – and as a fierce competitor, Salesforce.com won’t sit still.  So what should we expect from Microsoft?  That’s a difficult question.  Even as a Microsoft partner, we often don’t have much visibility into what is coming until the last moment, and even some of what we do see is subject to change.  So here is what we hope to see from Microsoft:
  
  
• Fix the New UI: There is a lot to be said for the new user interface in CRM 2013.  But there are also some things to be said against it. Just like Microsoft is correcting some of their mistakes made in Windows 8, we hope that the CRM team is planning some revisions to the navigation, real-estate layout, browser compatibility, related list access and lookup fields in CRM 2013.  These should all be fairly easy fixes and we hope to see some of them as soon as next week.  And, although we like the InsideView integration, it could also use a facelift to make it easier for users to adopt and easier to deploy only to selected users without creating issues with the user interface.
  
  
• Mind the (Old) Gaps: Some gaps remain in Dynamics CRM versus Salesforce.com, and some of them have been there for quite some time.  We hope that Microsoft plans to address these areas, most of them probably fairly easy fixes when compared to some of the much more significant functions that have recently been added.  Specific areas we would like to see addressed: calculated/aggregated fields, record types (somewhat similar to role-based forms), dependent option sets that are easy to create/maintain, a new interactive report builder, a single search bar that searches all entities (this is in the Windows 8.1 version – why not add it to the standard version?), contextual help (at the form, tab, field and view levels), apps (the ability to “select” an app and see a different set of top-level menu options based on this selection; and the ability to provide access to apps based on security role).  Fixing those areas would cover the most significant gaps between the two products and would be an appropriate response to Salesforce.com gaining on Dynamics CRM in the area of Outlook integration.
  
  
• The Administrator Experience: This is an area where Dynamics CRM lags behind Salesforce.com, but where Microsoft has an opportunity to leapfrog the competition.  From the very beginning, Salesforce.com has been easier to configure than Dynamics CRM.  In the past 5 years, Microsoft has made some gains in this area and Salesforce.com has actually slipped a bit (with all the new features in Salesforce.com, the configuration process has become more difficult) – but Salesforce.com still remains ahead of Microsoft in this area, and by a fairly significant margin.  Covering the old gaps (previous topic) will help.  But to really beat Salesforce.com in this area, Microsoft needs to make investments in rethinking the entire process of configuring Dynamics CRM.  The administration UI needs to be more intuitive, with more drag-and-drop, and significantly more free online training available.  The workflow engine could be made significantly more powerful and a Visio-like interface would go a long way towards improving it.  Administrators should not have to learn XML or install third party applications to handle common tasks such as update navigation or create nested option sets.  And Microsoft should renew their focus on xRM (using the CRM platform to create entirely new applications, without having to write code) – their new licensing structure has been a positive step in this direction, but there is significant opportunity to make strides in this area.  When we have analyzed the two products side-by-side, the administrator experience is the one area where Salesforce.com has consistently beaten Dynamics CRM by a wide margin.  And, because Salesforce.com has started to slip in this area, it represents an outstanding opportunity for Microsoft to take the lead.
  
  
• Business First. Technology Expertise. Microsoft, and almost all of their partners, focus on the IT department as their customer.  While this may make sense for infrastructure, tactical applications (such as Office) and programming languages, it makes absolutely no sense for strategic applications (such as the Dynamics products and mission-critical SharePoint projects).  Our customers look for a partner that is “business first” and that is “technology experts.”  Microsoft errs by placing technology first.  Salesforce.com errs by often excluding the IT department.  If Microsoft and their partners can retain their technology expertise, but learns how to put the business first, it will make a tremendous difference to the success of their projects, and the evolution of their product line.

What’s Next?

The marketplace is already buzzing with rumors in the wake of the announcement of the Salesforce.com / Microsoft partnership.

Will Microsoft try to acquire Salesforce.com?  We don’t think so.  That would simply create too much overlap with other Microsoft products, would require Microsoft support a product written entirely on non-Microsoft platforms, and at a time when Salesforce.com appears to be over valued.  The partnership aligns well with what Microsoft is already doing with SAP, Oracle and Apple; and with what Salesforce.com is also doing with Oracle.  Nothing to see here.  Move along.

Will Microsoft exit the Dynamics CRM business?  Again, we don’t think so.  There is plenty of room for multiple players in those areas, and the Dynamics product line (and CRM specifically), appears to be doing quite well for Microsoft.  Dynamics CRM remains one of the top rated products by the industry analysts and we expect those ratings (and sales) to increase as a result of some of the recent improvements made.

Will this partnership lead to one clear winner and a loser finally?  Individuals committed to one of the two solutions with a religious fervor seem to think so … but unfortunately we can’t contribute to do the drama … don’t expect this to happen unless one of the two companies makes a significant strategic blunder.  Both organizations continue to invest heavily in developing their products and in acquiring new products to integrate into their suite.

We do believe the announcement is truly about serving customers.  Both organizations have invested in strategies that have not produced the desired payoff and, in the end, it is their customers who have paid the price.  Specifically, we believe this partnership means the following:

• Salesforce.com is acknowledging that they will not attain the hoped for penetration of the collaboration and social space that they were hoping for – and that their strategy of partnering with Google has not produced the penetration of the email and desktop application space that they were hoping for.  For a long time, Salesforce.com was clearly resisting any kind of association with Microsoft.  In fact, they appeared to intentionally be walking away from integration with Outlook and SharePoint, and actively tried to either develop their own capabilities for these areas, or align with Google to fill these gaps.  Salesforce.com customers lost by having steeper learning curves and more time consumed with integrating their CRM system with Outlook.
  
  
• Microsoft is acknowledging that they have not established themselves in the mobile, tablet or cloud markets as they had hoped.  Although Microsoft has made heavy investments in all three of these areas, the strategy of Satya Nadella seems to acknowledge that they are far enough behind in these areas that they need to partner with others in order to serve their customers well.  While Microsoft may continue to invest in the mobile, tablet and cloud areas, it has become clear that their customers have been the losers by having desktop applications and operating systems that increasingly did not speak to their CRM system. 

What do you think about the announcement?  How do you expect it to impact you?  Do you think it is time for C5 Insight to do another another Microsoft Dynamics CRM and Salesforce.com Side-by-Side Comparison webcast to highlight the differences between these two amazing customer management platforms?