Microsoft, Salesforce Partnership Is Proof That Business Makes Strange Bedfellows

It’s often been said that politics makes for strange bedfellows, but the same could be said for business. If you want proof, look no further than yesterday’s partnership announcement between Salesforce and Microsoft.

These are two companies that compete fiercely for the same customers in the CRM space, suddenly making nice. If you look closely at the deal, you’ll see it’s probably one they both needed to make for various reasons.

As Microsoft tries to transform itself to a cloud and mobile company, having the cachet of one of the original cloud vendors helps give it credibility as well as access to customers who are already comfortable using cloud products.

Meanwhile, Salesforce has watched while Oracle and SAP have made deals with Microsoft, and Marc Benioff may want to ensure that his company isn’t left out of the Microsoft cloud-mobile push (and all of those enterprise customers that the model brings with it).

R. Ray Wang, founder at Constellation Research, says his phone has been ringing off the hook since yesterday with calls from Microsoft Dynamics partners who were caught off guard by this announcement. Wang told me that one of the big differentiators up until now was Dynamics integration with Office 365 and that’s gone now that Salesforce has the same integration.

Wang says it’s clear Microsoft has made a decision internally that it’s a platform company now and anyone who wants to play on the Microsoft platform is welcome to come aboard, even if that company competes with an internal Microsoft product.

In a post on Microsoft’s Your Dynamic Business blog, Kirill Tatarinov, president of the Microsoft Business Solutions Division, tried to calm the nerves of partners, but he was driving home the same point as Wang: It’s about the service to the platform. “But today is not about our competition. It is about partnering with others in the industry and giving customers solutions that best meet their business needs,” Tatarinov wrote. Reading between the lines here, it means that Microsoft is doing just what Wang has suggested: working the platform.

Moving forward, Wang says, all decisions will be made at Microsoft in support of the platform. “If you view Microsoft as a platform company, they will make decisions [from now on] in the interest of the platform,” Wang said.

Frank Lee, a Microsoft Dynamics MVP who runs the consulting firm Workopia and has watched these two companies battle it out for a long time agrees, saying the deal signals a new era in the way Microsoft does business, one in which vendor lock-in is less important than working across multiple platforms.

As a Dynamics consultant, Lee says it’s natural to want exclusivity in deals, but he realizes this isn’t necessarily realistic. He’s also been around long enough to know that just because companies make a deal to work together doesn’t mean that it’s automatically going to work out.

“Microsoft has plenty of partnerships that didn’t work out and were more of a marketing spin. For example – Dynamics CRM had partnered with TenDigits for their mobile solution, it didn’t work out and then moved on and partnered with CWR (another mobile solution for Dynamics CRM) and then finally build their own Dynamics CRM Mobile solution that we see today,” Lee said.

Wang pointed out that ExactTarget, the marketing cloud product that Salesforce bought last year will run at least partly on Azure, although Benioff left his options open in terms of cloud hosts. But it means that Salesforce customers who are interested in Azure will get access to a range of Azure services that weren’t available to them before, especially around big data and analytics, Wang explained to me.

Chris Bucholtz, Director of Content Marketing for Relayware and a CRM Buyer Columnist, and someone who has been writing about CRM for a long time said the deal lets Microsoft have access to a range of customers without having to push Dynamics. “It’s easier to go to new customers and say you integrate with SFDC than to make an argument for replacement or custom integration,” he said.

Regardless, both companies get something from this deal and the cloud and mobile made it possible. The two companies recognize that even though they are competing for many of the same customers, they are better off being frenemies and getting access to each other’s customer bases, than they are standing in separate corners fighting it out.

It’s a strange dynamic, but mutual need is driving business strategy in the age of cloud and mobile and forcing companies to rethink traditional ways of doing business.

And that’s creating partnerships and cross-pollination among organizations that would never have seemed possible. Perhaps Satya Nadella is a new type of leader. Perhaps he’s just pragmatic, and maybe Benioff simply sees a practical route to get more business, but whatever the reason, these businesses have hopped into bed together.

And that’s pretty remarkable.