Strategic CIO // Executive Insights & Innovation
Commentary
10/4/2009
11:47 AM
Bob Evans
Bob Evans
Commentary
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Salesforce.com Mixed Blessing As Collaborator & Competitor

Salesforce.com's new joint venture to create financial apps on its Force.com platform will provide great comfort to C-level prospects evaluating the SaaS model. But for partners already creating financial apps on Force.com, Marc Benioff's company now presents itself as a competitor as much as a collaborator. Insightful analyst Jeffrey Kaplan breaks down this mixed blessing.

Salesforce.com's new joint venture to create financial apps on its Force.com platform will provide great comfort to C-level prospects evaluating the SaaS model. But for partners already creating financial apps on Force.com, Marc Benioff's company now presents itself as a competitor as much as a collaborator. Insightful analyst Jeffrey Kaplan breaks down this mixed blessing.Here's how Kaplan views the collaborative pluses, via his recent post on SeekingAlpha.com:

Salesforce.com's entrance into this market clearly lends greater credibility and visibility to SaaS-based financial applications as a viable alternative to legacy, on-premise software. Its deep pockets and powerful marketing engine should significantly increase the amount of attention aimed at CFOs. This will certainly help all SaaS companies trying to educate CFOs and others in the executive suite about the business benefits of SaaS.

The new initiative will also send shockwaves through Microsoft (MSFT), Oracle (ORCL) or SAP, who are already facing serious challenges trying to respond to the rapid rise of customer interest in SaaS alternatives.

But as is so often the case in life, the heady rapture of the infatuated connection is often followed by morning-after questions. And here's how Kaplan lays out the Salesforce-as-competitor side of the deal:

But, the joint venture will also raise concerns among many SaaS vendors who have been suspicious of Salesforce.com's ulterior motives for a while. The joint venture is an obvious threat to direct competitors in this segment of the market. It also poses questions for other SaaS and traditional software vendors who may have been considering Salesforce.com's Force.com PaaS.

Why should they build their applications on the Force.com platform if there is a chance that Salesforce.com might eventually compete with them? Especially, since this isn't an isolated event.

An excellent question, and it doesn't end with this move by Salesforce.com into financial apps, as reported by my colleague Mary Hayes Weier. Now that it's into CRM and, via the JV, financials, what's to stop Salesforce from pursuing other significant categories such as procurement or HR?

And don't be fooled into thinking that the literal name "Salesforce" will restrict the company from stepping outside of applications centered on sales teams; after all, the company called Microsoft now uses its own products to run enormous data centers, and the company called IBM doesn't exactly sell a lot of business machines these days.

No, as Kaplan hints, Salesforce.com's aspirations will be limited only by its analyses of market potential, not by preconceived category limitations nor by sensitivity over how some arm's-length partner might feel. And that's exactly how it should be in the free market, with animal spirits holding sway.

Kaplan's Salesforce.com post, like much of his work, is timely and insightful and well worth reading; you can see his ongoing blog here. As for this collaborator/competitor conundrum with Salesforce.com, well, that's really the larger story of this business, isn't it? Success in the complex IT world will be based in large part on companies' ability to compete viciously against each other on one front while somehow finding a way on other fronts to collaborate for customer benefit first, which then accrues back as mutual benefit to each partner/collaborator.

As Larry Ellison noted recently, "You know who the biggest reseller of Oracle in the world is? That would be SAP."

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