It's game on as IBM-Salesforce ally to rebalance the enterprise cloud
- Summary:
- It's game on in a very serious power play as IBM Salesforce strengthen alliance to rebalance the enterprise cloud away from the grip of rival Oracle
Database is a deeply embedded technology stack item that makes departure a painful, expensive, and therefore dubious, scenario. However, we’ve seen effective two-tier strategies in areas like ERP where upstart cloud providers surround legacy apps and slowly but inevitably squeeze them out. Could this happen in databases? Does it need to?
Vendors across the spectrum are loath to let themselves become captives of any supplier and the Salesforce-Oracle relationship is a prime example, but so are IBM and Microsoft plus any smaller competitor/customer at this point. Each major vendor offers fundamental cloud and other technologies upon which customers must now make decisions that will reverberate through the decades at least to mid-century.
My enemy's enemy is my friend
This is a classic situation where the customers can’t build out all the supporting technologies they need for reasons of cost and time. So to protect themselves they establish triangular relationships among suppliers effectively playing off one against the other. In this context, the adage that “My enemy’s enemy is my friend” is more than some ancient platitude. It’s a succinct game theory gambit that appropriately describes what’s now transpiring in the cloud markets.
That’s the situation that best describes today’s joint announcement from IBM and Salesforce. In it Salesforce named IBM a preferred cloud services provider — note the use of the indefinite article ‘a’ and not ‘the’. At the same time, IBM named Salesforce its preferred customer engagement platform for sales and service. The agreement heavily leverages IBM’s Watson AI platform and its cloud, and Salesforce’s Quip and Service Cloud Einstein products. At the same time, it excludes Oracle, a company that competes up and down the stack with both IBM and Salesforce.
By getting more deeply involved with IBM, Salesforce hedges its relationship with Oracle even though the IBM relationship has nothing directly to do with the latter’s relational database, DB2.
Over the last few weeks, Oracle, in the person of Larry Ellison, CTO and Oracle co-founder, has been quick to point out that Salesforce (and Amazon) remain securely in its customer base and Salesforce has obliged with confirming statements. But at the same time, Oracle would naturally want to increase its footprint within Salesforce, an event that Salesforce would be naturally wary of.
Salesforce triangulates with IBM vs Oracle
In IBM, Salesforce has a partner that competes less directly with it than Oracle, which offers its own CRM, ERP and HCM suites. Salesforce does not offer its own ERP and HCM but its ecosystem does — some of whom have already begun their own triangulation with IBM. Protecting the ecosystem is important to Salesforce’s growth prospects as that company strives to reach a goal of $20 billion in revenues in the next few years. As Salesforce CEO Marc Benioff put it in the press release,
The success of our customers drives everything we do at Salesforce, including our strategic partnership with IBM. The combination of IBM Cloud and Watson services with Salesforce Einstein and Quip will deliver even more innovation to empower companies to connect with their customers in a whole new way, leveraging the power of the cloud and AI.
IBM provides a triangulated counterbalance to Oracle’s influence in Salesforce’s life. The implied threats by Salesforce to Oracle, should the latter company decide to improve its position through muscle, is that Salesforce could easily shut down Oracle’s ambitions for a closer relationship and, if conditions ever got bad enough, contain Oracle and eventually take its business down the street.
In the same release Ginni Rometty, chairman, president and CEO, IBM said,
Naming IBM as a Salesforce preferred cloud services provider demonstrates the power of the IBM Cloud to help companies fundamentally change the way they do business. This expanded partnership builds on the combined power of Watson and Einstein to help enterprises make smarter business decisions.
My take
Each statement is rather bland and can be read in multiple ways. But the message is clear and important. It’s clear that no single vendor will be able to dominate the cloud market in the foreseeable future. Each is carving out niches that it can make more or less impenetrable through large redoubts.
To put things into finer perspective, Oracle has plans to deploy 13 regional data centers to serve its customers around the world. In contrast, IBM already has nearly 60 cloud data centers across 19 countries. Now there’s no direct comparison between the architectures, Oracle’s 13 could easily be a match for IBM’s 60 if, for instance, Oracle’s architecture proves to be more modular. And neither have anything like the scale of Amazon Web Services or Google, with both of whom Salesforce also partners for cloud services (in the context of which, Benioff has himself used the phrase “the enemy of my enemy is my friend”).
But you can’t deny IBM’s larger footprint in the cloud when compared with Oracle’s. Nor can you ignore the fact that as a strategic business decision, the Salesforce-IBM alliance is a very good counterbalance and solution to over-reliance on any supplier. These guys are all playing chess and that makes it fun to watch.