The Microsoft/salesforce.com product integration partnership announcement left quite a few people in the CRM industry scratching their heads.
However, when one digs into the motivating factors for the partnership, the announcement comes as no big surprise.
The Microsoft Side
Now that the Ballmer era is over, Satya Nadella has an opportunity to reshape Microsoft’s business relationships, among other areas that could use a fresh approach.
Keep in mind that Microsoft has historically had its most financial success with products that did not involve a sales cycle. While Microsoft Dynamics CRM often involves a sales cycle, sales of Office rarely requires salesperson involvement.
Google Apps for Business has been going strong recently — and Microsoft has a lot more to lose from a drop off in Office market share than it has to gain by selling more Dynamics CRM.
Removing a competitive advantage or two over salesforce.com that it currently has with CRM prospects is a small price for Microsoft to pay in the grander scheme of things.
The Salesforce.com Side
Salesforce.com, for it’s part, only makes money from the sales of its core CRM offering and related products such as the ExactTarget Marketing Cloud. Almost all of salesforce.com’s sales involve a sales cycle and the involvement of an account executive.
Since so many companies are standardized on Microsoft, salesforce.com has always enjoyed a lot of success with “Microsoft shops” — despite the fact that Microsoft has had a competitive product for a decade.
If salesforce.com can make Microsoft customers even happier, it will experience less churn. Churn is something that every SaaS vendor works hard to prevent.
While Google Apps has had strong uptake in segments like higher ed and startups (there’s a relationship between these two), there’s little evidence to suggest that larger established companies, representative of many of salesforce.com’s customers, are “going Google” to any significant degree — so far.
As far as salesforce.com re-platforming its flagship product on SQL Server, that’s not going to happen. Larry Ellison couldn’t get salesforce.com to rethink its version of multi-tenancy within the Oracle environment.
This partnership is a win/win and it’s not going to be a flash in the pan.