What's really behind the Microsoft-Salesforce deal

It's a deal only Satya Nadella's Microsoft would make

At first glance, it doesn't seem like there are many ways SalesForce.com and Microsoft should partner: They both offer competing SaaS services. But upon closer inspection, the deal that the leaders of these two companies spoke so highly of during a joint conference call on Thursday afternoon makes a lot of sense not just for these companies, but customers as well.

At the most basic level, this agreement is about two major things: One is the integration of Salesforce’s CRM SaaS application with Microsoft Office 365 Tools; the other is the fact that Salesforce will use Microsoft’s Azure’s IaaS cloud to host its Exact Target marketing product. The news is a win for customers who will have easier collaboration between their Salesforce and Office apps, and it’s a win for Microsoft’s cloud business to secure a major customer in its fight against Amazon.

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“Seamlessness is always attractive to customers,” says Gartner’s Merv Adrian, who leads the research firm’s analysis on Microsoft. It’s unclear exactly what the integrations will be between the CRM app and the Office apps, but easier sharing of data between the two platforms could make life better in a variety of ways. Integrations between the CRM tool and Exchange email, for example could make scheduling and prospecting easier for Salesforce users. Integrations between CRM data and Microsoft’s Excel spreadsheets can make tracking and analysis easier for Excel users. The tricky part is that Microsoft has its own CRM tool in Dynamics. But that’s what these companies get in a world of co-opetition.

The other big part of this news is how Nadella is able to stomach that “frenemy” relationship with Salesforce.

Microsoft Azure is getting a major customer win out of this deal too. The cloud platform that Nadella helped build before he became CEO of Microsoft now has a big-name client on board in Salesforce. This will help build up the company’s credibility as a hosting platform for a major application, albeit Salesforce’s Exact Target emailing and blast notification service, and not the core CRM functionality. (Just to be clear: Salesforce is not certifying its CRM to run on Azure, the company only committed to running Exact Target on Azure.)

Credit: Microsoft

Satya Nadella and Marc Benioff are friends, and competitors too

“Microsoft is out to win business in the cloud wherever it can,” says Hyoun Park, principal at DataHive Consulting. “Amazon should be on notice.” Just this week Gartner reaffirmed Amazon Web Services as the top dog in the IaaS cloud market, but it said Microsoft is catching up. Deals like the endorsement of Azure from Salesforce will only help Microsoft’s case.

But the reality is that it’s a heterogeneous world. Benioff and Salesforce aren’t putting all their eggs into the Azure basket. Benioff referenced on the conference call that Salesforce’s Heroku application development platform uses AWS, for example. Benioff made a big announcement with Oracle last year; today it was Microsoft’s turn.

Gartner’s Adrian says Microsoft embracing this world where they realize their customers will be customers of their competitors as well is a new-found world for Microsoft, and it shows the influence Nadella is having on the company. “The old world walls are crumbling,” Adrian says, and that should be reassuring for customers.

Senior Writer Brandon Butler covers cloud computing for Network World and NetworkWorld.com. He can be reached at BButler@nww.com and found on Twitter at @BButlerNWW. Read his Cloud Chronicles here.  

Copyright © 2014 IDG Communications, Inc.

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