Microsoft bears shield, as Salesforce and Google synch up

With the Salesforce.com-Google collaboration, Microsoft will face yet another competitor in the online enterprise software applications market, analysts say.

But make that enterprise with a little "e."

Google's online applications will be integrated with Salesforce's customer relationship management (CRM) applications, giving it an entry point into Salesforce's customer base of mainly small to midsize customers and department-level groups of large corporations, said Kevin Buttigieg, an analyst at the Stanford Group.

"It expands the distribution of Google Apps," Buttigieg said, noting that the search giant likely views it as a starting point to later drill into large corporate accounts, in which Microsoft is dominant. "I think it will have a significant impact on Microsoft over time, but how soon and how large is hard to say."

Google Apps has a price advantage, but its feature functionality is lagging behind Microsoft in such areas as the detail of its spreadsheets, analysts say. And Buttigieg notes that Google Apps lacks an offline version. This may factor into large enterprise customers' hesitancy to use it, for fear of losing the ability to operate critical parts of their business, should the servers that host the applications crash.

As part of the agreement, Google Apps, Gmail, Calendar, and Google Talk will be tightly integrated with Salesforce, marking a move by Salesforce to offer a wider package of Web-based applications and cutting ties to desktop versions.

Another analyst, meanwhile, characterizes the Salesforce-Google announcement as a defensive move by Salesforce against the launch of Microsoft's hosted CRM service, Microsoft Dynamics CRM 4.

"Microsoft Outlook is ubiquitous. And that gives Microsoft a huge advantage in CRM because almost everyone uses Outlook in the business world. Google is not a threat to Microsoft, but Microsoft is a threat to Salesforce," said Pat Walravens, an analyst at JMP Securities.

Ironically, as Monday becomes the first day the free 30-day trial of Microsoft Dynamics CRM 4 becomes available, Salesforce is announcing its Google deal, Walravens observed.

He also noted that pricing on Microsoft's CRM offering will be competitive to Salesforce. Microsoft is offering two versions, both of which will include core sales, marketing, and service functionalities. But the basic version, with a monthly price of $39 per user, will include 5GB of database storage, while the professional-plus version will be offered at $59 per user, with 20GB of database storage and offline data synching.

Microsoft is also believed to have created an inside sales team to focus exclusively on its on-demand CRM version, Walravens noted, as a further sign of stiffening competition between Salesforce and Microsoft.

The Salesforce-Google deal is not the first between the two companies. Last year, Salesforce and Google announced a partnership in which Salesforce would be a reseller of Google AdWords. At the time, the companies said they hoped that the partnership would drive other development projects between the companies.

Evidently, it is doing just that.

Update: April 14, Monday, 12:20 p.m.

Microsoft, meanwhile, has no plans to change its strategy as a result of the Salesforce-Google deal, said Brad Wilson, general manager of Microsoft Dynamics CRM.

The software giant intends to continue to invest heavily in on-demand services, data centers, and Internet-delivered applications, he noted.

Wilson said the Google-Salesforce partnership validates Microsoft's efforts to integrate CRM applications with personal productivity tools, a step it took five years ago.