googlesalesforce1.jpgHere’s more on the product integration announcement yesterday between Google and Salesforce, two of the most important players in online applications space.

At some point, the two companies were bound to collide because their target customers in the online applications world are the same. Salesforce has been a trailblazer in online business application market from the beginning. Google, which last month began pitching a “Search, Ads and Apps” strategy, is a relative new comer. Google has a wide range of offerings and Salesforce has its AppExchange platform.

Google builds (or more accurately, buys) and integrates most of the apps, while Salesforce has remained a platform. Their strategies stem from their origins. Google is an engineering company, while Salesforce is sales driven. Salesforce doesn’t have the engineering strength to build lots of apps, nor does it have the cash resources that Google has to acquire companies.

Salesforce has been frustrated. Chief executive Marc Benioff initially pushed NumSum (remember his memo?) one of the early spreadsheet providers. In Nov. 2006 at Web 2.0 Summit (at the Enterprise 2.0 mashup session), Benioff talked about integrating another online spreadsheet provider, iRows, into AppExchange. Ten days later, however, iRows’ founders joined Google. The folks at another online applications company, Zoho, in Pleasanton, Calif., said they had some discussions with Salesforce too a few months ago, but wouldn’t provide any other details. Zoho’s CRM app competes with Salesforce’s. Another provider in this market is ThinkFree, which Salesforce also probably talked with. But ThinkFree, according to reports, declined an offer by cash-rich Google, making it unlikely it would accept an offer from Salesforce (though this is just speculation). Currently Benioff is actively promoting EditGrid (and its integration into AppExchange). But he needs more than a spreadsheet application to continue leading in online applications. That leaves Google Apps.

Salesforce needs Google. But does Google need Salesforce? Less so. Integration between Salesforce and Google Apps make sense for work-flow reasons. Integration between CRM and other applications like email, spreadsheets, etc., makes sense too. But on price reasons, Google doesn’t need to make Salesforce its primary focus for distribution here. Google sells all of its business apps combined for $50 a user per year, and offers a lot of other stuff for free. Salesforce’s pricing is north of $60 a user per month.

Google is unlikely to buy Salesforce because Google has no history of buying larger companies unless they fall directly in its core business area (like advertising, where we saw Google buy Doubleclick). Google’s acquisitions in the applications arena are small, including Writely, XL2Web, Tonic Systems, JotSpot and Marratech. Google is more likely to acquire a smaller CRM player. While Salesforce has some marquee customers, the majority of Salesforce’s customers are small to mid-sized businesses which Google can serve well with its existing array of applications.

The more interesting question is how Google treats Salesforce moving forward. Will it hold to its “do no evil” policy?

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