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6/29/2013
00:54 AM
Charles Babcock
Charles Babcock
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Salesforce, Benioff Must Beware Oracle's Embrace

This new relationship holds much promise for Oracle, not so much for Salesforce. It reminds me of Captain Ahab's relationship with the great whale.

Oracle announced partnerships last week with competitors Microsoft, Netsuite and, most surprising, Salesforce.com. These announcements serve the same purpose as the Argentine junta's invasion of the Falklands -- they're a riveting diversion from what's going wrong at home.

Oracle is missing its numbers, and I don't know when Oracle last missed three out of seven quarters. One drain on Oracle is its decline in the CRM market. Earlier this month, Gartner declared Salesforce.com, approaching a $4 billion run rate by the end of 2013, the market leader for the first time. Among other things, the new Oracle/Salesforce partnership signals that the CRM battle is over and Oracle has lost it. The next threat is the growing presence of Workday, which has conquered human resources and is seeking to become the Salesforce of online financial applications. And behind Workday is Intacct, ServiceNow, SugarCRM and 100 online software startups, all marching on Fortress Oracle.

Oracle wants to do something, anything, to slow the growth of Workday, which threatens to eat into two more of its revenue streams. Heretofore, Workday's biggest ally has been Salesforce, which has put on stage the large figure of Marc Benioff, brandishing his "No Software" sign while defending the effectiveness of online applications and providing thought leadership about how packaged software is being disrupted. Salesforce itself uses Workday financials and human capital management, or rather it did, until the Oracle partnership was announced June 25. Salesforce will start using Oracle products instead. Count one punch landed on Workday; don't worry, the effect will quickly wear off.

In a press and analyst teleconference Thursday, Ellison and Benioff combined to explain the new partnership. Benioff said the Salesforce cloud infrastructure was built in 1999 on the Oracle database and that will continue be so for next 12 years. Combined with Benioff's exultant tweet that Salesforce is buying 50 Exadata machines ("I'm super excited our new 12 year @oracle partnership includes 50 @Exadata to make our DB for our 1B customer transactions run faster!"), this pact looks more and more like a really big Salesforce purchase order, with a few "partnership" flourishes thrown in.

[ Want to learn more about how Larry Ellison reversed his opposition to cloud computing? See Ellison Threatens Cloud More As Friend Than Foe. ]

There had been rumors that Salesforce was experimenting with open source PostgreSQL, the database system that can match Oracle front-end features, run Oracle applications and take in wholesale transfers of Oracle data. Unlike MySQL, PostgreSQL is fully ANSI SQL compliant and is an open source competitor to a commercial relational system. It would have been an intolerable blow, on the eve of the Oracle 12C launch, if Salesforce converted to PostgreSQL.

If Salesforce wasn't testing PostgreSQL, it should have been. Three years ago, Oracle gave Salesforce an incentive to do so when Ellison went from database supplier to an attacker of Salesforce's ability to maintain its customers' data integrity.

At Oracle OpenWorld in 2010, Ellison warned that Salesforce's multi-tenant approach "co-mingled" its customers' data in one application system. It sounded like Salesforce mixed its customers' data in a shared memory pool; good luck on getting your transactions out. This, of course, is not how multi-tenant applications work. But with customers worried about data privacy, Ellison fastened onto the shared resources of multi-tenancy as the cloud's Achilles heel. Anything could happen with such a "weak security model," he said. In his address the following year, he carried the analogy a step further and said a Salesforce multi-tenant application may be co-mingling your data with that of your competitors on the same server, and you'd be lucky to escape them seeing it.

Salesforce had been a major Oracle customer for 11-12 years at the time these statements were made. At an all-Oracle event, there was little chance of rebuttal. Instead, Ellison used the CEO's keynote to attack the data integrity of one of Oracle's largest customers. As Salesforce's sole database supplier, he was in a position to know about its data architecture. Ellison didn't know -- or chose to ignore -- how multi-tenant applications actually work. They build virtual machine boundaries to wall off each customer's data. The walls can't be breached by application logic, and there's no case history of failure. Perhaps wisely, there was no outcry from Salesforce over these false charges. Nevertheless, it was still unusual to see a major technology vendor attack a major customer's operations.

Under other circumstances, Benioff (or someone) should have stood up for Salesforce CTO Parker Harris and his team. They had built the first multi-tenant, software-as-a-service product successfully used on a mass scale. Was it wise to shrug off an attack from such a prominent industry leader? Salesforce was probably spared the need to respond by Ellison's previous statements that the cloud was "complete gibberish" and an approach for "nitwits." That is, he had already established his reputation as a subjective and reckless critic.

Still, Benioff's previous relationship with Ellison, when Benioff was a young executive at Oracle, came into play as well. In his 2009 book Behind the Cloud, Benioff relayed how Ellison had been his mentor and how he had to be talked into resigning from Oracle -- he didn't want to leave -- to lead Salesforce full time. He named Ellison to the Salesforce board, then was furious and wanted to fire him when Ellison financed online applications supplier Netsuite. That, too, was an unusual move to have a board member launch a potential competitor.

For Benioff, the younger of the two, there appears to be an unrequited, cherished big brother aspect to his relationship with Ellison. For Ellison, there's the always difficult choice, where a young competitor is concerned, between big brother and Big Brother.

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cbabcock
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cbabcock,
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7/12/2013 | 4:38:10 AM
re: Salesforce, Benioff Must Beware Oracle's Embrace
An associate points out that I've mis-stated how the data integrity is achieved in a Salesforce.com application. On an Amazon multi-tenant server, its achieved with enforcement of virtual machine boundaries. On a Salesforce multi-tenant CRM application, it's achieved at the database level through the database's enforcement of user identity/user access rights. The conclusion stands: there are no cases established of data owner privacy loss or data integrity loss through this approach.Charlie Babcock, InformationWeek
cbabcock
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cbabcock,
User Rank: Author
7/9/2013 | 7:10:28 PM
re: Salesforce, Benioff Must Beware Oracle's Embrace
To wdollar338: A Salesforce.com buy-out agreement would cost Oracle a lot at this point, wouldn't it? Oracle is not in the habit of paying a premium. On the contrary. Without a big upturn, such a move would be likely to spark shareholder unrest, something that Oracle seems to pay attention to. Charlie
wdollar338
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wdollar338,
User Rank: Apprentice
7/4/2013 | 5:32:42 PM
re: Salesforce, Benioff Must Beware Oracle's Embrace
Larry Ellison and Marc Benioff must have some secret buyout agreement! Otherwise, why on earth would Marc run into the open arms of a dangerous character like Ellison.
jbrockman651
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jbrockman651,
User Rank: Apprentice
7/4/2013 | 4:27:11 PM
re: Salesforce, Benioff Must Beware Oracle's Embrace
Could it be that Larry Ellison is thinking about a succession plan? Is this a first step to something bigger? Dare we say "merger" or "acquisition"?
Ian Moyse
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Ian Moyse,
User Rank: Apprentice
7/3/2013 | 2:02:31 PM
re: Salesforce, Benioff Must Beware Oracle's Embrace
For the smaller client this will mean more clarity around Salesforce as an Enterprise play with Enterprise pricing. Customers will find more clarity around options other than Salesforce at independent sites such as www.g2crowd.com

Ian Moyse
Workbooks
cbabcock
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cbabcock,
User Rank: Author
7/3/2013 | 12:45:59 AM
re: Salesforce, Benioff Must Beware Oracle's Embrace
Is it good for Salesforce's business to prompt its partners to question its long term commitments and strategic direction? Momentary gains sometimes undermine long term goals. But yes, a business deal with flourishes of partnership. Oracle said it would use Salesforce CRM, but the example of where they would use it, allowing an Oracle acquisition already using Salesforce to continue using Salesforce CRM as a testbed of their application integration, left me thinking Salesforce doesn't have much to show for this deal. Maybe more use is planned. But that was the example cited. Charlie Babcock
ggiese87101
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ggiese87101,
User Rank: Apprentice
7/3/2013 | 12:15:48 AM
re: Salesforce, Benioff Must Beware Oracle's Embrace
I can only assume that this deal was purely business on Salesforce's part. In other words, they got a discount on Oracle products and Oracle promises to help send customer's their way. Costs go down and revenue goes up, which means profit goes up, too. That's important to the stockholders and the board. I agree and suspect they will offer private cloud deployments, too. Good analysis, my customer-side view of things agrees with what you wrote. That said, I too would have liked to see Salesforce instead announce use of a different database technology and either partnering with other "cloudies" or buying/merging with one or two. Would have been better for the market. Too bad Larry was on the BOD otherwise things might have gone differently. I prefer an Oracle that has to scramble and do things like reduce prices and/or make better software, actually compete on product price/performance instead of salesman ability. While we're at it, I really hope they'll fix things with Java, bummed that it's taking such a beating and the tech is getting stagnant.
cbabcock
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cbabcock,
User Rank: Author
7/2/2013 | 10:36:25 PM
re: Salesforce, Benioff Must Beware Oracle's Embrace
Roger that, Roger Smith. Salesforce and Oracle. It's complicated. Glad you're still reading. Charlie Babcock, InformationWeek .
rsmith9411
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rsmith9411,
User Rank: Apprentice
7/2/2013 | 10:03:57 PM
re: Salesforce, Benioff Must Beware Oracle's Embrace
>Warning to pursuers of whales everywhere: If you're rushing into a leviathan's embrace, make sure it's not going to sink you.

You put into words what a lot of people are thinking. Glad you're keeping your harpoon sharp!

--Roger Smith
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