Salesforce.com Deals with Google After Failing to Land Zoho

 
 
By Clint Boulton  |  Posted 2008-04-16
 
 
 

Salesforce.com Deals with Google After Failing to Land Zoho


Vegesna said Salesforce.com is spending too much on marketing and not enough on R&D.

Salesforce.com's fortified integration with Google could bolster both companies' strategies to tackle Microsoft in the applications market.

But the deal might not have happened if Salesforce.com acquired Zoho two years ago. That's what Zoho Evangelist Raju Vegesna told eWEEK in a phone interview April 14 following the publication of a controversial blog post by Sridhar Vembu, CEO of Zoho parent company AdventNet.

Vegesna told eWEEK that as late as 2007, Salesforce.com and Zoho were in negotiations to be at least partners, if not to consummate an outright marriage.

The SAAS (software-as-a-service) business applications leader considered buying Zoho, Vegesna said, to leverage the company's collaboration software suite, which Zoho positions as an alternative to Google Apps and Microsoft's Office suite.

Such a deal appears to be all but dead now that Salesforce.com has proclaimed Google as its Apps platform of record.

Courtship Before Marriage

Salesforce.com declined to comment for this report, but Vegesna said Salesforce.com and Zoho began discussing a relationship, possibly even an acquisition in 2006.

However, Zoho's concern about Salesforce.com cost structure, which according to these estimates includes spending eight times more on marketing than research and development, prompted Zoho to offer to partner first.

"Let's date first before we get married," Vegesna said he recalled thinking. "We thought we'd experiment as an AppExchange partner, and if it goes well, maybe we'll take it up to the next step."

Zoho, one of the first Salesforce.com customers back in 1999 before it started using and selling its own Zoho CRM product, worked to integrate with Salesforce.com AppExchange in 2007.

But Salesforce.com pulled the plug a few days before it could go live, telling Zoho it could not work with AppExchange any longer because it had a competing product in Zoho CRM.

Later in 2007, Vegesna said Salesforce.com and Zoho rekindled conversations, discussing a possible acquisition. Financials were not discussed, and the talks didn't go well.

A deal was long dead even before April 14's Google-Salesforce.com bond, according to Vegesna, who echoed Vembu's blog when he said the company's corporate cultures were at odds.

Marketing Trumps Research and Development


"Hiring lots of salespeople is not good for a company," he said. "They cannot deliver affordable software." But part of the disparity, he admitted, is that Zoho prefers to remain private.

While Vegesna said Zoho operates under the "never say never" clause that most companies take, he agreed Salesforce.com is probably not going to come knocking again anytime soon. 

He also questioned whether or not Salesforce.com and Google would be able to work together because Salesforce.com focuses on the enterprise while Google is pretty open to work with anyone. Some analysts agree.

IDC analyst Rachel Happe said Salesforce.com is serving some big accounts and needs the service-level agreements required by larger businesses, while Google targets businesses that want to pay little or nothing.

"That difference will likely cause tension in the relationship, but it will also likely grow over time," Happe told eWEEK April 14. "In the short term it gives Salesforce some publicity and a product extension, and it gives Google a go-to-market channel for its Apps product."

Gartner analyst Tom Austin told eWEEK April 14 the Salesforce.com-Google deal is designed to generate more press for cloud computing in the hope that it will generate longer-term dividends for Salesforce.com.

What those benefits are, he added, is unclear.


Rocket Fuel