Analysis: Salesforce's Addition of Google Apps Shows Google's Intent to Enter Business Software Market

By tapping into Salesforce's customer base and latching on to that company's reputation as a trusted corporate technology provider, Google can make inroads in selling its software to businesses.

By C.G. Lynch
Mon, April 14, 2008

CIO — Salesforce.com is scheduled to announce today that it will offer Google Apps— Google's Web-based software that includes e-mail, calendar, instant messaging, documents and spreadsheets—to its current customers for free, in a move analysts say further illustrates Google's commitment to sell its technology to businesses.

The partnership between the two companies will also put increased pressure on Microsoft and its Office productivity software suite, which, next to the Windows operating system, accounts for a majority of that company's revenue.

"We're committed to Google Apps as an offering [for business] and we're working hard to make this a new way for people to work," Scott McMullan, the lead partner at Google Enterprise, told CIO.

With the move, Google will now have access to a larger pool of businesses to draw from and convince that their software, delivered over the Web, provides a compelling and cheaper alternative to Office, which Microsoft requires companies to install and run on their own machines and servers.

The deal also means Google gets access to Salesforce.com's sales department, "who, by the way, were able to convince businesses that online applications are the way to go," says Rebecca Wettemann, a vice president and analyst with Nucleus Research.

A Match Made "in the Cloud"

"We have a natural affinity for Salesforce customers," Google's McMullan says. "This [partnership] allows us to reach them more quickly."

This "natural affinity" McMullan speaks of comes from the fact that both companies have built their business models, and their subsequent base of customers, over the Web. Salesforce.com's core product is customer relationship management (CRM) software, which companies use to track the activities of their clients and manage sales and marketing leads.

Like Google, Salesforce.com delivers software to customers over a Web browser and hosts the data on their own servers, a strategy often described as "cloud computing." Unlike Google, which makes an estimated 98 percent of its revenue from advertising and search, Salesforce.com has been making lots of money doing it.

Since launching from a San Francisco apartment in 1999, Salesforce.com has sold its CRM product to approximately 42,000 customers and reported nearly $800 million in revenue last year.

"By having a partner like Salesforce who has far more of a positive reputation in meeting enterprise requirements, Google can only win," says Tom Austin, a Gartner analyst. "In the past, Google hasn't behaved the way companies want providers to behave."

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