As I recover from this weekend's Thanksgiving festivities, I’ve been struck by two thoughts regarding last week’s Dreamforce conference,
- Salesforce.com’s (NYSE:CRM) new Chatter social computing functionality may be a defensive as well as proactive move.
- An acquisition of Salesforce.com by Oracle (NYSE:ORCL) may be a friendly maneuver rather than a hostile takeover.
As I reported in my previous blogpost, Salesforce.com’s introduction of Chatter last week at Dreamforce was met with mixed reviews. Many customers, partners, analysts, press and even internal staff and salespeople were uncertain about the company’s goals and capabilities in this new area.
I believe that building an ‘enterprise-class’ social networking component makes sense and adds a timely new dimension to salesforce.com’s fundamental functionality.
Marc Benioff justified Salesforce.com’s move by claiming in his keynote address at Dreamforce that neither Facebook nor Twitter were willing to fortify their services to meet the needs of enterprise users.
But, what if this isn’t true? What if Facebook and Twitter could add a contact database, tracking mechanisms and other features to their services in the future to meet the needs of enterprises? Would today’s consumer-oriented, social networking sites become tomorrow’s corporate customer relationship management (CRM) systems?
Changing the focus of a consumer-oriented online service is possible. Apple (NASDAQ:AAPL) is quickly converting its consumer-oriented iTouch into a powerful business-oriented iPhone with thousands of add-on apps from a widening array of third-party developers.
And, IBM (NYSE:IBM) is also moving in this direction with LotusLive. This is transforming the company’s pioneering but dormant on-premise collaboration application into a viable on-demand business service.
So, Salesforce.com may not only be responding to growing demand for social networking tools among corporate end-users, but also demonstrating its astute competitive instincts by quickly strengthening its defensive position against future attack from Facebook, Twitter or others in this realm.
On the acquisition front, I’ve been predicting for a couple of years that Oracle would make a hostile bid to takeover Salesforce.com to capitalize on the company’s rapid growth and commandeer the growing SaaS movement. I also predicted that Google (NASDAQ:GOOG) would be the ‘white knight’ who would come to Salesforce.com’s rescue to preserve this important path to the enterprise market.
Having Benioff speak at OpenWorld clearly showed that Oracle doesn’t view Salesforce.com as a simple competitor. Instead, it illustrated the more complex relationship between the companies.
While Larry Ellison has enjoyed making disparaging remarks about the long-term profitability and viability of the SaaS business model, he has also been very happy to accept Salesforce.com’s money as one of Oracle’s biggest database customers.
At the same time, Benioff is recognizing that he no longer has to play the role of revolutionary to evangelize about the business benefits of SaaS and ‘cloud computing’. Instead, he now knows that it is more important to convince a broader cross-section of enterprise decision-makers – both IT and executive – that SaaS and cloud computing services are not radical ideas and can easily integrate into their legacy environments and enhance their current operations.
This tack exponentially increases Salesforce.com’s addressable market opportunity by appealing to a broader array of organizations who may have been too risk-adverse to accept SaaS and cloud computing alternatives if they viewed them as an ‘either-or’ proposition.
With Oracle on the cusp of acquiring Sun Microsystems (JAVA) (depending on the disposition of various regulatory hurdles), it may be ready to make a more aggressive move to consolidate its position in the SaaS and cloud computing marketplace by moving ahead with a salesforce.com acquisition.
I no longer believe Benioff would resist such a move. Throughout his new book, Benioff repeatedly gives Ellison credit for his personal success and the success of Salesforce.com. He refers to Ellison as his personal mentor and describes instances in which Ellison’s decisions helped Salesforce.com overcome critical challenges.
So, if Benioff doesn’t view Ellison as an adversary, will he be willing to risk the future success of Salesforce.com by accepting an Oracle acquisition. It won’t be his decision. If Oracle offers a good enough price, Benioff is obligated to accept it.
The question is now whether Google, Cisco Systems (NASDAQ:CSCO) or another company will try to outbid an Oracle offer to enhance their own position in the SaaS and cloud computing market.