Google, subsidiary of Alphabet (GOOG, Financial)(GOOGL), and Salesforce (CRM) announced a partnership early this week that will see the fast-growing cloud giant and the customer relationship management software segment leader integrate their products to offer a seamless experience to both their customer bases. The partnership is not just great for the customer but also has the potential to benefit both the companies over the long term.
Salesforce.com will begin offering integrations between its CRM platform and G Suite, which it hopes will enable its clients to seamlessly exploit customer intelligence between Salesforce Lightning and Quip, and G Suite applications such as Gmail, Hangouts Meet, Google Calendar, Drive, Docs and Sheets. By bringing the best of Google's G Suite and analytics together with some of Salesforce's CRM solutions, both companies are ultimately reaching new customers without giving up any of their respective markets.
Both Google and Salesforce are facing a common threat in Microsoft (MSFT, Financial). The Redmond, Washington, giant has been extremely aggressive in building itself into a horizontal player in the cloud segment that includes both the Infrastructure as a Service segment, where it competes with Google, and Software as a Service segment, where it competes with Salesforce.
Given a choice, any customer in a particular industry will choose to work with a single vendor, and things are no different in the software industry. Microsoft has already positioned and differentiated itself in the cloud market as a player that offers nearly every type of software a company would need as well as the infrastructure and the productivity tools.
Microsoft was extremely weak in the customer relationship management segment, and that’s the reason the company paid nearly $26 billion to buy LinkedIn (LNKD, Financial) and strengthen its product portfolio on the customer relationship management front. That segment now includes Dynamics 365 integrated with LinkedIn Sales Navigator, which is a powerful CRM and sales tool within easy reach of LinkedIn’s more than 500 million business and professional users.
As stand-alone entities, both Google and Salesforce stand to lose a lot of customers to Microsoft’s “we-have-everything” infrastructure and software bucket. But when they both join hands and offer seamless integration between their products, their combined software prowess will be in a position to challenge Microsoft products and make sure that they are able to compete on an even scale with the Windows maker over the long term.
Google certainly has a lot to benefit from, as Salesforce is already the No. 1 player in the CRM segment and is still growing fast. The 100,000-plus customers that Salesforce has now quickly become easy-to-absorb customers for Google’s G Suite, which has been facing a tough time competing against the fast-growing and more robust Microsoft Office 365.
For Salesforce, the deal certainly cuts the headache of losing future customers to Microsoft and has the potential to allow Salesforce to retain its lead in the CRM segment while leveraging Google’s cloud-related product portfolio.
Though the material benefits of the Google-Salesforce deal may never really be visible to investors of both these companies, their partnership is an extremely important strategic move, one that gives both companies the edge they would lack against Microsoft if they were to compete on their own.
Disclosure: I have no positions in the stock mentioned above and no intention to initiate a position in the next 72 hours.
