It was reported yesterday that Salesforce.com and Google are discussing hooking up. There is a lot of power in this potential partnership, but also some risk both for those considering the solution and for existing Salesforce.com customers. That has to do with what the big kid on the block does and, in this case, I'm not talking about Microsoft, even though it seems to be the initial target.
Software-as-a-service is not only here to stay -- it represents the future of software for a broad cross-section of products. You can even see Microsoft moving in this direction with its Live properties. My own conversation with its current CEO, Steve Ballmer, when he first got the job indicates that this future was anticipated by that company before the turn of the century.
Google's "Apps" offering is, as yet, relatively immature and will, if successful, follow a path similar to the one Salesforce.com blazed. Google is expert at alternative forms of product payment. This is the path Google blazed that Salesforce.com is likely to want to follow.
Advertising-Like Funding Could Work Inside Corporations
I've heard it argued that enterprises and schools don't want advertising, and granted initially this may be true. However, I can think of examples where even for enterprises advertising could be acceptable. Let's say HR wants to promote something to employees, or a franchisor wants to promote to their franchisees, or Corporate wants to "advertise" to the divisions, or networks to the employees in the affiliates, or Marketing to Sales, or Sales to Support, or, in the case of GM, you want as many employees as possible to buy -- and convince their friends to buy -- the latest GM cars.
We often think of advertising as we get it, from third parties, but companies often need to promote things internally, and one division is likely to be willing to pay for the right to do that more effectively. This means that IT can get funding for a new technology from budgets that may now be barred to them. For IT, anything they can do to get more funding is a huge plus when it comes to considering a solution.
Let's get even more creative. Companies often have partners. A natural partnership might be between a retail chain like Best Buy and HP that sells a lot of products in Best Buy. In exchange for Best Buy being able to advertise in HP, HP is allowed to promote more aggressively in Best Buy. Both companies see increased sales as a result. While not likely near-term, with margins as tight as they are, anything that promotes sales effectively could be very powerful. It is not unusual for affinity programs to exist in companies, and these are treated by employees as benefits (and generally don't cost the company anything to roll out).
Google Apps Need Help Maturing
On the productivity side, Google needs a sales force that can move its products and these products need to mature a great deal before they will be accepted broadly. Granted they have a lot of ex-Microsoft employees, but these people didn't create Office, they just lived with managing it. Google is likely already learning there is a lot of difference between managing a legacy product and creating one in the first place. Saleforce.com employees created their product and can help Google learn how to at least better address the needs of Salesforce.com's existing customer base. This should give it the critical beachhead it needs to penetrate the market more broadly.
In short this combination, in an ideal case, is potentially massively powerful, but it comes with massive risk.
While Microsoft has been aggressively pursuing the concept of software-as-a-service, Oracle has not. In fact, it appears its exploration is largely a huge existing investment in Salesforce.com. Oracle doesn't play nice and is incredibly aggressive. It remains the only tech company that in recent years bought a large competitor with the simple goal of shutting that competitor down. Salesforce.com would be vastly easier to take out, at least on paper, than PeopleSoft was.
Oracle has largely left Salesforce.com alone, but that is because the company didn't represent much of a threat. This kind of solution, particularly when you loop in the creative funding aspects of the result, turns what has, from Oracle's point of view, been an interesting experiment into a very real risk.Oracle is likely to respond aggressively if it sees this risk as clearly as I do.
As a partnership, the risk of failure is simply that the partnership may not work out. Its failure shouldn't dramatically hurt either company, except as an embarrassment, but a success could result in a PeopleSoft-like attack from Oracle which then would be motivated to deal with the large price discrepancies between the Salesforce.com and Oracle offerings. I doubt Oracle will lower its own prices, which creates a reasonably significant upside risk for Salesforce.com customers.
Under this scenario Microsoft/SAP might be able to step in and steal market, but they would have to move more quickly than I've ever seen them move before.
There are no big rewards without big risks. Regardless of Oracle's response, this move, if successful, could accelerate substantially not only the idea of software-as-a-service but the concept of advertising inside companies (even though I doubt we will actually call it advertising).
Both Google and Salesforce.com have been relatively successful as change agents. If the rumored partnership becomes reality, it has the potential to fuel a change of historical proportions, and bring much-needed budget relief into IT organizations, over time, both large and small, potentially redefining TCO.