This time last year Salesforce and Microsoft were BFFs, celebrating a new era of detente enabled by the glasnost on offer from the latter’s more partnership-friendly CEO Satya Nadella. Nadella himself was even given a main stage solo slot at Salesforce’s flagship customer event Dreamforce.
It was all a far cry from the Steve Ballmer-era of Microsoft, when the firm picketed Dreamforce with a heavy-handed marketing spoiler stunt involving a made-up customer called Bernard (which was itself then spoiled rather spectacularly - check it out here!).
But today, on Dreamforce-eve 2016, things are rather different. Nadella’s partnership proclivities have became practically promiscuous as Microsoft’s cosied up to a host of other vendors, not the least of which was Adobe last week, provider of a rival Marketing Cloud to that of Salesforce.
Microsoft also won a significant deal with HP Inc, a Salesforce customer, that led to Microsoft’s EVP Cloud and Enterprise Scott Guthrie to refer to the growing competition between the two firms:
[HP Inc] are very large Salesforce shop – or they were until yesterday. They are planning a massive migration and big bet on Dynamics. It’s one of the more public ones that we’ve had, but we’re starting to see some really good success in the market at a broad level, and particularly, right enterprise. Now let’s [just] say, for CRM in particular, enterprise is our sweet spot.
For its part, Salesforce went out and bought Quip, a nakedly out-and-proud Microsoft Office competitor.
It’s all a far cry from 2015 when the talk was all about full scale mergers between Salesforce and Microsoft. But the biggest strain on the relationship between the two firms was the bidding war for LinkedIn, a battle that Microsoft won with a bid of $26.2 billion.
Salesforce CEO Marc Benioff later went public with his annoyance at the bidding process, stating that he would have been willing to go higher with a Salesforce offer, but LinkedIn had chosen to negotiate solely with Microsoft. At the time, it was clear that Benioff was out of sorts with the end result, but yesterday it became apparent just how displeased he is when he posted two tweets:
Now, that’s not actually what Guthrie explicitly said, although it's an interpretation that can easily and justifiably be extrapolated. For the record, what he said was:
We've announced plans to acquire LinkedIn. It's not complete yet, so kind of all the standard caveats there. But the interesting thing, assuming regulatory approval and all the right caveats…the signal that you get from a professional graph, say for example from LinkedIn, where you know who knows who, each other, you know the relationships, you know their skill sets, you know who they worked with in the past.
The insight you get from a sales reps' or customer service reps' inbox with Exchange and what we have in Office 365, the insight you get from someone's calendar, and even with Skype all of their phone and voice communications and IM traffic, you take all that together and have a cloud that can do deep insight and analytics and machine learning and AI on top of that. You create the ultimate selling tool, the ultimate customer support tool in the industry, because you have so much insight that can assist a sales rep or assist a customer service rep that no one other vendor can provide.
Still, the “ultimate selling tool, the ultimate customer support tool” - that’s not terminology that’s going to play well elsewhere in the CRM market.
Regardless of the specific semantics, Benioff’s tweets were the first public acknowledgement that Salesforce has raised anti-competitiveness objections with the European Commission after regulators there sent out a request for comment to Microsoft rivals. Salesforce argues that Microsoft’s ownership of LinkedIn and its data assets would give it an unfair advantage over other firms in the market.
Burke Norton, Salesforce’s Chief Legal Officer, confirmed:
Microsoft’s proposed acquisition of LinkedIn threatens the future of innovation and competition. By gaining ownership of LinkedIn’s unique dataset of over 450 million professionals in more than 200 countries, Microsoft will be able to deny competitors access to that data, and in doing so obtain an unfair competitive advantage.
Salesforce believes this raises significant antitrust and data privacy issues that need to be fully scrutinized by competition and data privacy authorities in the United States and in the European Union. We intend to work closely with regulators, lawmakers and other stakeholders to make the case that this merger is anti-competitive.
For his part, Norton’s Microsoft counterpart Brad Smith stated that Salesforce was too late to prevent regulatory approval in the US:
Salesforce may not be aware, but the deal has already been cleared to close in the United States, Canada, and Brazil. We’re committed to continuing to work to bring price competition to a CRM market in which Salesforce is the dominant participant charging customers higher prices today.
It’s been quite a year for Salesforce and Microsoft - from BFFS to ‘friends with benefits’ to…what? I was struck by the sniping tone of Smith’s statement, ie: Salesforce is the dominant participant charging customers higher prices today. Regardless of the rights or wrongs of that claim (and I’m not getting into that here), them’s fighting words.
Does Salesforce have a chance at halting the LInkedIn takeover? Does it even realistically want to?
If it were to be able successfully to pursue the case that it appears to be making - and the devil is in the detail here - then that same case might be made in the future if Salesforce were to bid for, just as a hypothetical case in point, Twitter. The LinkedIn concerns are a reminder that Salesforce needs data for its sales and marketing clouds just as much as Microsoft.
A more realistic agenda here is surely to ensure that Microsoft has to agree to open up LinkedIn’s data to third parties. If the European Commission can insist that Salesforce (and other vendors) customers cannot be blocked from using LinkedIn as a condition of approving the deal, then that would put some considerable pressure on Microsoft.
So how likely is it that the Commission will decide to investigate? Pretty damn likely, I’d imagine. The Eurocrats in Brussels never knowingly turn down an opportunity to get on their high horses about the US tech industry and Microsoft’s a long-standing target of their attentions.
In addition, the current Commissioner in charge of anti-trust matters, Margrethe Vestager, is very hot on the topic of how data should be managed in the digital economy. While she has yet to comment specifically on the LinkedIn/Microsoft deal, with suspiciously immaculate timing she yesterday told the EDPS-BEUC Conference on Big Data in Brussels that:
Companies need to make sure they don't use data in a way that stops others competing.
She cited the case of Google’s purchase of DoubleClick in 2008. which was the subject of the kind of EC inquiry that Salesforce is calling for with LinkedIn and Microsoft. In that case, when looking at how important access to DoubleClick’s data was for companies to compete, the Commission found no concerns, so the merger was approved.
But she added:
It's possible that in other cases, data could be an important factor in how a merger affects competition. A company might even buy up a rival just to get hold of its data, even though it hasn't yet managed to turn that data into money. We are therefore exploring whether we need to start looking at mergers with valuable data involved.
Knowing how the Commission works, I read that as bad news for Microsoft.
(On the subject of knowing how the Commission works, I’d be fascinated to know what counsel Neelie Kroes, Salesforce’s latest board member, has given around this. In her former role as European Commissioner for Competition and later for the Digital Agenda, I suspect she’d have been all over the LinkedIn/Microsoft plans like a bad rash! I know Benioff has enormous respect for her views and advice.)
Will Salesforce’s cri du coeur halt Microsoft’s planned takeover of LinkedIn? Realistically probably. not. The US and Canada have already signed it off and Microsoft’s not buying a direct rival. (I can only imagine what the Commission would have said if Nadella had managed to pull off a merger with Salesforce!).
Will it slow down the merger with LinkedIn that Microsoft still says it expects will close by the end of the year? Quite possibly if Vestager stays true to form.
Will Microsoft have to issue some guarantees around its intentions for LinkedIn's data? Maybe so if it wants to keep the Commission off its back.
And pressing question of the day - how much air-time will Microsoft be getting at next week’s Dreamforce jamboree? Er...
Dreamforce 2015 with Special Guest Star Satya Nadella suddenly seems awfully long ago.