Salesforce’s Triangulation Strategy

Partnerships may be playing the role usually reserved for merger and acquisition activity in the CRM world right now. Generally a company makes a purchase when it wants to capture the benefits of another business’ R&D or established market base. However, at the moment it appears that the desirable targets are too big to swallow, and the result is more partnering between the big guys and the really big guys.

Salesforce has been pursuing this strategy for most of the last year with Amazon, Google and IBM. This says a lot about the state of the marketplace on several fronts.

Joining Forces

First, Salesforce and Amazon announced a partnership in which Amazon and its AWS infrastructure service would become Salesforce’s strategic infrastructurepartner when Salesforce absolutely had to deploy a data center in a foreign land.

This makes perfect sense. As I have often said, it makes no business sense to build (in this case, a data center) when you can purchase the solution at a reasonable price on the open market.

As a competitive issue, Salesforce’s choice of Amazon is a direct challenge to Oracle, because it offers a safe haven, which enables Salesforce to diversify its partner portfolio while keeping Oracle and Microsoft at arm’s length. Given the rumors of Salesforce being acquired by a big tech firm over the last few years, this seems a good way to help preserve its independence.

Much the same can be said of the alliance with Google. This is primarily a play for more small and mid-sized business customers, and it’s a good one. Salesforce and Google announced their partnership around G Suite, Google’s free office apps.

A while ago, Salesforce and Microsoft created an integration with Outlook, effectively making Outlook another user interface for Salesforce. This parallels Microsoft’s own integration with its CRM and Outlook. So this partly neutralizes Outlook as a differentiator in any CRM decision.

Google integration gives Salesforce access to all those G Suite users who need CRM, especially in the SMB space. It also gives Salesforce another way to compete against Microsoft CRM. Of course, the company didn’t stop there. Salesforce also now has an integration with Google Hangouts, an effective counter to Skype, which now is owned by Microsoft.

Away from the SMB space in the enterprise market, Salesforce also forged a relationship with Google Analytics. Not that it needs more analytics, but the two partners have developed plausible processes that use Google Analytics to surface macro trends and Salesforce Einstein to go the last mile, a model that works with IBM too.

Salesforce and IBM got closer last week, with Salesforce naming IBM a preferred cloud services provider and IBM calling Salesforce its preferred customer engagement platform for sales and service. The agreement leverages IBM’s Watson analytics and its cloud, as well as Salesforce Quip (more office software) and Service Cloud Einstein.

21st Century Information Utility

In all of this, we can see that Salesforce has been working to maintain its independence by linking with anything that can enhance its CRM and make it less desirable as an acquisition target. Of greater importance, it’s these relationships and others like them that will help Salesforce reach its goal of US$20 billion in revenue in a few years.

When your revenue needs are this big, you need to leverage the market penetration of similar companies. While all of the companies named are bigger than Salesforce, each needs the bragging rights of working with the most popular CRM in the world.

Another question in all this is what’s happening with M&A activity, which seems to lull while partnerships blossom. The merger market is notorious for running hot and cold, and right now it seems tepid, like there’s more opportunity for large companies like Salesforce crafting relationships with bigger partners.

It’s not clear if this means there are few attractive acquisitions out there, or simply that the times require different approaches to the market.

More than once in talks since Dreamforce last fall, Marc Benioff has used the logic that “my enemy’s enemy is my friend.” This logic is being played out in the partnerships his company has been spawning. On one level, it’s just smart business — but in the back of my mind, I see the information utility of the 21st century forming.

It will resemble the current electric utility in that no single provider will dominate and a high degree of interoperability will be needed. Standards like 120 volt and 60 Hertz electricity are what give us the impression of a continental electric utility grid, but in reality the grid is made up of smaller vendors adhering to the standards.

Likewise, there’s no single vendor capable of dominating the information utility market, and standards will be vital. That’s why it’s so important when a company like Salesforce inks partnerships. These incremental agreements have more significance than the announcements might allude to. They are steps on the road to something bigger.