Microsoft and Salesforce: How the former suitors are once again disputers

Two years ago, Salesforce was Microsoft's big buddy, and possibly even a Redmond takeover target. Now it's trying to derail Microsoft's LinkedIn deal with anti-competition claims. What happened?
Written by Mary Jo Foley, Senior Contributing Editor

Microsoft and Salesforce are moving out of the mutual-admiration phase of their relationship and into a renewed rivalry.

Credit: Twitter

Salesforce CEO Marc Benioff has taken off the gloves and is looking to stir up regulatory trouble for Microsoft over Microsoft's still-not-finalized $26.2 billion LinkedIn acquisition. In some ways, it's not too surprising Benioff isn't happy, given Salesforce lost out to Microsoft on the LinkedIn bid, (even though Salesforce actually came in at a higher price).

But new tweets from Benioff, plus a statement by Salesforce's chief legal officer, make it clear he's not letting lost-deal bygones be bygones.

Benioff tweeted on Sept. 29:

"Amazing @Scottgu says @Microsoft 2 use @LinkedIn data 4 anticompetitive bundles & denying access to rivals."

Benioff points to a transcript of Microsoft Cloud and Enterprise chief Scott Guthrie's appearance earlier this month at a Deutsche Bank tech conference as evidence.

Benioff added: "I hope @ftc and @vestager have an oppty to read the anticompetitive bundling plans of @scotgu against rivals." (Vestager is Margrethe Vastager, European Commissioner for Competition.)

I went back and looked at the Guthrie transcript. He only talked about LinkedIn once, and not in specifics, as regulatory approval for Microsoft's deal hasn't happened yet. But here's what Guthrie said in response to a question on LinkedIn:

"... 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 Zack wants me to say, 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."

I'm not sure I'd call the usual vendor boasting -- "no one other vendor can provide" -- as proof Microsoft won't allow Salesforce to continue to access LinkedIn data. That type of move seems like it would be the strategy of the "old" Microsoft more than the "new" one. These days, when Microsoft has purchased a number of other cross-platform companies recently, the company has gone out of its way to make sure it continues to allow users to access data the way they want.

I will point out right before Guthrie's comment on LinkedIn, he did some show-boating of his own, claiming Microsoft's recent deal with HP was a "takeout" against Salesforce. Guthrie claimed HPE as a "very large Salesforce shop, or were, until yesterday", and that HPE was planning a "massive migration" to Dynamics from Salesforce.

Like most customer wins, the truth isn't quite so clear-cut -- or at least that's what I hear. HP is still going to be a pretty big Salesforce customer, from what I hear from sources. Anyway, back and forth bluster between rivals is nothing new. But the latest rhetoric coming from Salesforce and Microsoft is surprising, given how lovey-dovey the two were up until recently.

The pair announced a sweeping partnership in 2014, with Benioff, at the time, extolling CEO Satya Nadella's virtues over those of former CEO Steve Ballmer. And then, at least according to rumors, Microsoft almost bought Salesforce.

Once that deal fizzled, it seems animosity between the two CRM competitors is back to near-normal levels. Microsoft moved its somewhat lackluster Dynamics CRM and ERP business under Guthrie's cloud organization and subsequently announced plans to launch a new combined CRM/ERP cloud bundle called Dynamics 365. Salesforce, after making a big commitment to Azure, decided to go with AWS (at least in part) for its cloud infrastructure.

Sure, just today, Microsoft announced that the Salesforce Lightning-Skype for Business integration promised a year ago is now in beta. But I wouldn't be expecting a whole lot of love from these two companies going forward.

This week at the Microsoft Ignite conference, Microsoft officials said they are still expecting to close on the LinkedIn deal before the end of calendar 2016. Bloomberg notes that Microsoft has not yet officially submitted its deal to the EU to regulators for consideration but says US regulators already have given the purchase clearance.

Update: Microsoft's official statement on the Salesforce objections make the regulatory-approval point -- plus a bit more.

Microsoft President and Chief Legal Officer Brad Smith said: "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."

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