Analysis: Google has $26.5 billion in its coffers, so it’s become fashionable to wonder what big vendor Google could buy next, what statement it can make to shake the foundations of technology.
With a market cap of $11 billion, enterprise application maker Salesforce.com would be such a buy.
In a May 4 post on Silicon Alley Insider, entrepreneur Pascal-Emmanuel Gobry argued Google can’t compete with Microsoft now that the software giant has launched Microsoft Office 2010 to peck away at Google’s cloud computing collaboration software market. Gobry noted:
“We believe that if Google wants to become a significant player in the enterprise market, it needs to buy Salesforce now, at whatever price.”
Gobry’s argument has two points. The first is that Google would immediately gain some 72,500 customers, from smaller shops to several Fortune 500 companies, picking up “significant relationships with basically all the CIOs of the world’s largest companies.”
His second point is that Google would gain a true sales culture for the enterprise, a departure from its ad-driven salespeople.
He argued that Microsoft succeeded because it married a great engineering culture and sales culture. Google, he said, should buy the company and let Benioff run the enterprise division, assuming of course Benioff would be amenable to the purchase and his role.
Google and Salesforce.com are well acquainted, making the idea of a merger somewhat interesting. Salesforce.com integrates with Google Apps and the two vendors created hooks between the Force.com platform and Google’s App Engine.
Raju Vegesna, technology evangelist for Zoho, which fights with Google in the SMB market for collaboration and with Salesforce.com in the low-end for CRM apps, said a Google-Salesforce.com marriage is not a good idea because their technology and cultures will clash.
First, he noted, Google uses open-source components and non-commerical software while Salesforce.com uses commercial software. “This means they would have to rewrite the entire thing in Google,” Vegesna told eWEEK.
Say what you want about Google and Salesforce.com both playing in SAAS (software as a service), but Vegesna won’t have it. Google’s is an engineering culture with some ad sales people. Salesforce.com’s is a sales culture with some engineers.
Google and Salesforce.com Are No Perfect Match
Google lets customers come to them to buy Google Apps, while Salesforce.com likes to knock on doors and sell it the old-fashioned way, Vegesna said.
This is part of the reason why Google charges its customers $50 per user, per year for its software, while Salesforce.com sells its CRM for $65 per user, per month.
These approaches won’t jibe. “Cultural incompatibility is the primary reason that kills acquisitions,” Vegesna said.
Forrester Research analyst Sheri McLeish said there is no urgency for Google to purchase Salesforce.com because it already offers some CRM and other functionality through the Google Apps Marketplace.
Launched March 9 in what many see as a direct challenge to Salesforce.com’s AppExchange, the Marketplace lets third-party software developers sell applications that integrate with Google Apps.
Salesforce.com was notably absent from the initial launch of 50 partners, and while conspiracy theorist like to wonder whether relations have grown frosty, the integrations in the Marketplace resemble the integration Google and Salesforce.com already enjoy.
“Google enjoys this experimental phase to find where there next billions are coming from I don’t think there is any urgency in acquiring Salesforce.com,” McLeish said. “Would it be surprising? No. Is it expected, or required? Not necessarily, they can work in partnership.
Gartner analyst Whit Andrews struck a similar tone, noting that Google acquires for technology, not for market position (YouTube being an obvious exception).
However, he noted Google would have sudden and almost irreplaceable access to the enterprise.
But Vegesna said Google CEO Eric Schmidt and his team would worry about when they would get their investment back. At $86.53 a share, Google would have to pay billions for Salesforce.com (think anywhere from $5 billion to $15 billion depending on the premium).
“I seriously doubt Google would get their money back,” Vegesna said, pointing to the $625 million Google paid for Postini for a Google Apps business that makes roughly $100 million per year.
Of course, Google picking up Salesforce.com would intensify competition with other providers of SAAS CRM, including Microsoft, SAP and Oracle. Google has proven it’s comfortable competing with anyone.
There aren’t many areas on the Web that Google isn’t playing in these days, and the search and Web services giant hasn’t been bashful about snapping up companies.
“If you’re in technology now, Google is competing with you,” said Andrews. “There is nobody that they’re not competing with. “But if you’re going to compete with somebody, you do it on your own terms.”