Salesforce.com Tried to Buy Zoho Before Google Deal

 
 
By Clint Boulton  |  Posted 2008-04-14 Email Print this article Print
 
 
 
 
 
 
 

Would today's enhanced integration between Salesforce.com and Google have happened if Salesforce.com had bought Zoho?

That's the multimillion-dollar question raised in my mind by AdventNet CEO Sridhar Vembu, whose company owns the Zoho unit that makes SAAS (software as a service) collaboration and business applications to rival Salesforce.com and Google.

Vembu blasted Salesforce.com CEO Marc Benioff's "business model bloat" in a blog post the afternoon of April 4, claiming that Salesforce.com spends nearly eight times on sales and marketing what it does on research and development.

This, Vembu said, was one of the reasons Zoho declined to let Salesforce.com acquire the unit in 2007. One has to believe that if Salesforce.com had bought Zoho, the company would be competing instead of partnering with Google.

Here is the dirt, along with a spreadsheet displaying Salesforce.com's revenues, to support Vembu's point:

Several months ago, Salesforce.com invited us to participate in their AppExchange ecosystem. They knew of our Zoho CRM competition (which is why it was mutually agreed that an NDA was inappropriate), but the AppExchange folks thought it was still good for their ecosystem. We agreed that it would be good for both of us, so we worked on making Zoho work with AppExchange, with their help & support. We invested in R&D to make the integration work, and we were about a week from launch when Marc Benioff decided to pull the plug. He invited me for discussions. He offered repeatedly to acquire Zoho outright, which we rejected. I told him there is absolutely no fit between our companies, particularly with his business model (as noted above) and our business model. I told him there is just no cultural fit between our companies, and such an acquisition would be miserable for both parties. Finally, he offered to let us integrate Zoho into AppExchange, provided we pull the plug on Zoho CRM. We told him that kind of pre-condition is totally unacceptable, and it also completely negates his claims of openness of their platform. Needless to say, we never did agree on the issue, and we dropped the integration effort.

Vembu then claims Benioff doesn't get open ecosystems, and in the next line praises the Google Gears folks for playing nice with Zoho (offline access for Zoho Writer). In the killing stroke, he claims the Google-Salesforce.com integration won't work because the "Salesforce business model is an evolutionary dead end."

Hmmm. Maybe I'm reading into this the wrong way, but Vembu sounds like a spurned man trying to denigrate one rival who it felt took it too lightly while cozying up to another rival. 

I also wonder where Zoho stands. Zoho's collaboration software must contend with the incredibly popular Google Apps on one front, while taking on the SAAS business app behemoth in Salesforce.com on the other. Imagine getting squeezed by that vise.

I'll be looking into this more closely with Zoho and Salesforce.com for eWEEK tomorrow.

 
 
 
 
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