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Only months before Saleforce.com and Google integrated their Web applications, Salesforce.com offered to buy Zoho, a direct competitor of Google Apps.

Sridhar Vembu, the CEO of Zoho parent company AdventNet, divulged that juicy nugget in a blog posting following the much-ballyhooed Google-Salesforce.com tie-up. Zoho makes Web-based productivity and business applications.

Vembu said that the proposed deal was never close to consummation, but it wasn't over the price tag.

He said that the Zoho and Salesforce.com business models are fundamentally at odds because Salesforce.com spends much more proportionately on marketing and sales. He also accused Salesforce.com of being a lousy partner.

Talk of an acquisition grew from an effort to integrate Zoho with Salesforce.com applications through its development platform. But Salesforce.com CEO Marc Benioff decided to pull the plug, Vembu recounts:

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.

By contrast, working with Google--its primary competitor--over Google Gears has gone well, Vembu said.

Meanwhile, Salesforce.com has done with Google precisely what it appears to have set out doing with Zoho--close product integration.

It's easy to discount Vembu's comments as sour grapes. After all, it's Google, not Zoho, that now has better access to Salesforce.com customers.

But his comments shed light into how business does, or doesn't, get done among software-as-a-service companies as they compete to build the most vibrant partner ecosystems on their platforms.

As people get their heads around Google App Engine, they see some things they may not like. Namely, the dreaded "lock-in."

Tim O'Reilly dissected whether Google's App Engine is a lock-in play on Monday, and RedMonk analyst Stephen O'Grady hit the issue head-on with his excellent Q&A on what Google App Engine actually is.

Developers for years have been clamoring for more openness and standards. They are tenets of the open-source movement.

But as more application development moves to hosted platforms, does data and application portability get lost in "the cloud"?

Given that we're at an early point in platform-as-a-service offerings, I'd say lock-in, to some degree, is inevitable. Most people consider Salesforce.com's Force.com closed, as it's based on the company's database and query language.

But Google? The search giant is hosting a Web development conference next month, not to sell more software stacks or subscriptions, but to encourage more apps--and people--to move to the Web, it says.

Still, O'Reilly takes Google to task for the lack of application portability--at least in this first iteration of Google App Engine.

"Now, it may be that this is a temporary oversight, and that Google does intend, long-term, to make it easy for developers to export their applications. After all, Eric Schmidt says he reminds his employees all the time, "Don't fight the Internet."

But it's also possible that this is one more sign that one of the big guys is forgetting the principles--the Internet as a platform (not "my company as a platform"), harnessing the power of user contribution (which, as John Musser pointed out, means that you always "pay the user first"), small pieces loosely joined--that brought their success in the first place.

Think his concerns are overblown? He's not the only one.

Within a few days of its release, programmer Chris Anderson wrote some open-source software, called AppDrop, that shows that you can conceivably run an instance written for Google App Engine on Amazon.com's Elastic Compute Cloud (EC2), Amazon's hosted server platform.

Developer Alex Bosworth listed lock-in as his top concern with Google App Engine.

It's likely that Google will allow applications written with other languages, like JavaScript. But the nub of online-platform lock-in comes from the data store, Bosworth said.

One thing both Amazon and Google could do to really show they are serious about their platforms is open up their data engines, which are really the core of most Web applications--open-source BigTable and SimpleDB. This would really reduce lock-in and make development easier, and it might even lead to some help improving their services.

O'Grady at RedMonk, too, argued that Google should open-source portions of its infrastructure or offer an API (application programming interface) to its data store that would ease portability to other databases.

Google appears to already be on the case of data portability. On the Google App Engine Blog, software engineer Kevin Gibbs said that one planned feature is large-scale data import and export.

"With Google App Engine, you own all the data in your app. As stated in our terms, you always have the right to get your data out of Google App Engine at any point. We wouldn't have it any other way," Gibbs wrote.

Once again, Google gets tongues a-waggin', even when it isn't the first to a party.

But it's good to see these issues raised and for developers to push for more openness. After all, standards, portability, and interoperability have been good to the Web.

Updated at 8:45 a.m. PT with information from Google App Engine blog on planned data migration tools.

Right now, some may look like the online equivalent of a quaint corner store. But catalogs of online applications are the front lines of a brewing battle among platform-as-a-service providers.

Start-up Coghead on Tuesday plans to launch Coghead Gallery, an online store where people in small businesses can hunt for applications.

The applications, written with Coghead's visual-development tool, run on its hosted platform. The platform, built using Adobe Systems' Flex, runs on Amazon Web Services.

At the start, there will be about 30 partners listing their business applications. Coghead's software is aimed at small development shops or tech-savvy businesspeople.

Although far smaller, its approach is similar to that of Salesforce.com's AppExchange, where people can find more than 800 customized applications written for Salesforce's development platform.

Hosted development platforms and tools, also called platform-as-a-service, are where a lot of software development is going, according to Web entrepreneurs. Rather than purchase a rack of servers and a software stack to run applications, developers can rely on a hosted platform to offer on-demand applications.

For platform providers, building the largest ecosystem of online Web developers helps accrue business, much the way Microsoft woos users of its development tools to drive sales of Windows and other stack software.

Although not a complete development environment, the latest entrant to this platform-as-a-service category is Google, with its App Engine, still in beta test version. Google now lets developers run their Python applications on the company's massive computing infrastructure.

Last week, Google opened up its own marketplace for listing third-party applications written for its enterprise products, including Google Apps and its search appliance. And on Monday, Google and Salesforce announced that Salesforce's customer relationship management, or CRM, applications, will be integrated into Google Apps through the Salesforce development platform, Force.com.

Open source comes to platform-as-a-service
Coghead's development service and gallery are specifically aimed at small businesses, both developers and customers. It is aiming to recruit value-added resellers or independent consultants with 2 to 20 people, according to company CEO Paul McNamara.

With a hosted development environment, they can write a Web application and get into the software-as-a-service business, he said.

"They used to sell their time for money by doing custom application development. It's a tough business because you're always chasing your next lunch, and if you take vacation, you aren't billing," McNamara said.

"Our value to them is that we let them transform the business by building an application for one customer and then selling it to other customers around the world," he said.

Ultimately, this model is disruptive because many more companies can get off the ground without the need for a large capital investment from venture investors, McNamara said. He added that Salesforce's AppExchange tends to focus more on large independent software vendors, or ISVs.

Developers on the Gallery can choose to take an open-source approach to listing, called the Open Definition model. They can make the template for their application available to others to copy, modify, and distribute--much like open-source projects allow people to tweak the source code.

Since most people don't actually work with source code when they use the Coghead service, they aren't actually using the source code. Another class of applications will be "IP protected," which means that customers can't copy and modify the applications.

Coghead plans to make money from Gallery by collecting a monthly fee for using the platform and listing the applications.