The cloud evolves every minute, changing shape, jettisoning some companies into oblivion and propelling others higher into the stratosphere… (always start an important discussion with a comment about the weather).
One persistent rumour floating around has been that of Google (NASDAQ:GOOG) buying Salesforce (NYSE:CRM). The rationale: Google needs a springboard into large corporates; now that its cloud infrastructure is perfectly in place, it can provide the entire range of office software, off-site in a cloud, at much lower cost of ownership to the Fortune 500. And CRM has done an evangelical role in promoting the cloud (and in so doing, criticising on-premise ERP systems), garnering a few enterprises for their CRM suite, and hopefully many more in the future. So the rationale goes, CRM would fit perfectly into Google.
From here the picture gets cloudier. CRM is effectively just that: a customer relationship management tool. The partial success they have had with large enterprises (i.e. with ERP systems like SAP (NYSE:SAP) or Oracle (NYSE:ORCL)) is when their software sits on top of the integrated ERP (mostly on top of an Oracle database and middleware), discrete and as an added tool to the front line staff. It’s perfect for people/sales orientated companies (like insurance brokers or real estate agents) and yes, they have had some success.
However, any company with a manufacturing or complex business process (um, i.e. Fortune 500) would be far better off adding the CRM module from SAP or Oracle to their existing software. Granted both incumbents have dragged their feet at entering the cloud, but this in itself points to the complexity of transferring a custom-built ERP system to the cloud paradigm.
So when investors muse about CRM as a target, they are wrong to brand it as a springboard into the enterprise for cloud computing;, it’s more an isolated appendage sitting on top of the enterprise’s main nervous system, the ERP.
Now let's make it rain. Google is serious about the cloud. They have the scale and the resources to entice the large corporates into entrusting their serious financial data, their heavy-duty functions like email (processing and storing) to a third party. Google has already done a phenomenal job on the individual --and even the small company--in being the exclusive host in the cloud. Last week they launched a few more applications into their Google App Marketplace. There were a number of CRM packages. And guess what? No Salesforce.
A bit of history is required to understand the weather. Two years ago, a partnership was trumpeted between Google and Salesforce; the premier CRM cloud company joined hands with Google’s infrastructure and office suite. What a combo, it was bound to receive a thunderous welcome from corporates! Alas, since then they have walked down different paths. Google chose an open platform to entice as many ISV using open standards; Salesforce created Force.com, using a proprietary language called Apex, a walled garden that even included their own App Exchange of software from ISVs (recently shelved to join VMware (NYSE:VMW), see below). Google’s decision last week to host a number of CRM packages excluding Salesforce is the newest twist in their separate roads.
Some more history (hey, weather is complicated!): also about two years ago, Salesforce tried to buy Zoho, a promising yet nascent ‘Office Suite’ company (think Excel, Word, PowerPoint, but with homespun versions that were perfectly convertible to MSFT’s formats) which was creating waves in smaller companies because of its open platform, the quality of software and its affordability. Zoho was about to launch a CRM module. It was a threat to Salesforce’s partnership with Google (rumour has it that Google was about to choose one). When Zoho declined to be bought, Salesforce immediately signed the alliance with Google ensuring privileged status with the giant.
Back to today’s cloudy weather. Zoho is now incredibly well integrated with Google and stands as the first choice for CRM in the Google app marketplace. It is seamlessly integrated into Gmail (a critical condition), has the entire suite of Office software (convertible into MSFT’s office suite). In fact, testimonials suggest it is better integrated into the Google platform than Salesforce, despite the two year preferential status that Salesforce enjoyed.
Will the large corporate enter Google’s cloud? For the business nervous system, I am not sure, despite the availability of a range of ERP software (Netsuite, Intuit) on their platform. It more likely that the large enterprise may entrust separable functions like email and CRM to the cloud-significant and essential functions, but not the core nervous system. However, if and when they do, the weather is now stacked against Salesforce and more likely to shine on the numerous CRM packages situated on the Google platform.
Where does all this leave Saleforce? In my opinion, as an isolated cloud between two promising ecosytems. On one end, squeezed by the enterprise ecosystem as SAP and Oracle (finally!) get their acts together on SAAS versions of their software; and excluded from the consumer/small business by Google App Marketplace on the other.
I believe Salesforce understands the changing meteorology and it was precisely this that prompted their alliance with VMware. But one tiny bridge back to the larger ecosystem (their attempt to hook up with the Java ISV by dumping Force.com and Apex) is too little too late. Salesforce is on an evolutionary road to nowhere. Google’s decision last week to exclude them is just one more step towards their isolation. Ask the French CEO - frogs can't fly.
Disclosure: Author holds a short position in CRM