That was my response to the announcement that Salesforce.com is integrating their CRM system with Google Apps. I respect what Marc Benioff has done to evangelize the SaaS model in the enterprise, but I cannot bring myself to accept his business model, which is summarized by the spreadsheet below (data courtesy of Google Finance):
Salesforce spends nearly 8 times on sales/marketing as it spends on R&D. Sounds to me a text book definition of “business model bloat”. If you are a customer of Salesforce, it makes you feel really happy that the company spends 8x on selling to you as in writing the code, right?
Let me mention some history here that I believe is relevant (note: I am not under any NDA). Several months ago, Salesforce.com invited us to participate in their AppExchange ecosystem. They knew of our Zoho CRM competition (which is why it was mutually agreed than an NDA was inappropriate), but the AppExchanage folks thought it was still good for their ecosystem. We agreed that it would be good for both of us, so we worked on making Zoho work with AppExchange, with their help & support. 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.
The reason I am recounting that history is to show just how little Benioff understands the value of open ecosystems. He is still playing a 1990s software game, with expensive software (sorry, software-as-a-service!) and a business model that is sure to make Larry Ellison flinch, which is saying something.
I want to contrast that with our Google Gears integration. Google is our principal competitor, yet neither their team nor ours had any issue at all integrating – it was obvious to us this is the right thing to do for customers. The Google Gears folks bent over backwards to make sure the playing field was level, and we got access to information and support to do the integration right. That is openness.
History shows that integration efforts like the Google/Salesforce one, where the business models are so radically different, don’t prove durable. Ultimately markets will be smart enough to figure out what is obvious to many already: the Salesforce business model is an evolutionary dead-end. The proof is the silent popularity of Zoho CRM, one of the most successful Zoho services to date.