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Google, Salesforce Take on Microsoft

by Maroushka Kanywani, Editor, Dashboard InsightWednesday, April 16, 2008

SAN FRANCISCO -- A battle is heating up between Microsoft (MSFT - Cramer's Take - Stockpickr) and two of its rivals in business software.

Microsoft is going after Salesforce.com's (CRM - Cramer's Take - Stockpickr) lunch by preparing to fully release its CRM Online subscription-based software.

In a counterstrike, the smaller rival has enlisted the aid of partner Google (GOOG - Cramer's Take - Stockpickr), in turn giving the Internet search giant something it lacked: a bigger foothold in the business application software market, where Microsoft dominates.

Beginning Monday, Salesforce's 1.1 million subscribers will find Google Apps integrated with their online CRM software. The two companies have tightly integrated Google mail, calendars, spreadsheets, Internet messaging and presentation software to automatically synchronize and archive information, messages, chats and appointments within Salesforce on-demand software. That comes at no additional charge to users.

"We've baked Google docs into Salesforce," said Sean Whiteley, senior director of applications for Salesforce.

During the summer, Salesforce will begin to offer Salesforce for Google Apps Supported, essentially a support-backed version of the Google Apps Premium Edition, at $10 a month. The companies would not disclose their revenue-sharing arrangements.

About half a million businesses use or have signed up to test Google Apps, said Scott McMullan, partner lead for Google Apps. Approximately 100 to 200 large companies, including General Electric (GE - Cramer's Take - Stockpickr) and Genentech (DNA - Cramer's Take - Stockpickr), are in a pilot phase with Google Apps. But the majority of users are consumers. Google will benefit through Salesforce's reselling of the Premiere Edition, McMullan said.

Both Salesforce and Google "believe in cloud computing," said Bruce Francis, Salesforce vice president, referring to software that is provided as a hosted service over the Web. The companies want to introduce their users to each others' applications "and grow our businesses. It's very much in our joint interests." The companies have been slowly expanding their relationship and links since 2003.

JMP Securities analyst Patrick Walravens wrote in a note Friday that Microsoft's release of CRM Online is imminent, with an announcement possibly coming as early as this week. "While one cannot buy the hosted 4.0 system today, Microsoft indicated it will be available in Spring 2008." Pricing is expected to be $40 to $60 per user per month, compared to $65 and up for Salesforce's business edition, according to Walravens.

Microsoft's entrance into the hosted CRM market may mean that Salesforce.com will start to go up against Microsoft in corporate sales situations, Walravens wrote.

Microsoft has announced the latest version of its Dynamics CRM software, which corporate users buy and install.

Business application software leader SAP (SAP - Cramer's Take - Stockpickr) also launched a subscription-based CRM product in late 2007.

While Google encroaches on Microsoft's traditional business lines by giving away comparable office application software, Microsoft has stayed a step ahead by unifying those applications as collaboration software with Internet phone systems and videoconferencing sessions initiated from within the Outlook program.

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