Is Salesforce.com the new Microsoft?

Salesforce.com CEO Marc Benioff has railed against Microsoft for years as he wages his self-described war on software. With more than a little justification, he has called the software giant on its bullying tactics and offered his vision of affordable, nimble software on demand against the ancient regime's insistence on cumbersome, Windows-only applications. And he's been an articulate advocate of the move to cloud computing. Sure, his outsized ego and penchant for lavish marketing displays are a turn-off. But because Salesforce.com has changed the industry for the better, I've been willing to cut him quite a bit of slack. But now he's crossed a line by trying to strong-arm a tiny company into killing its most important product after it turned down his offer of a buyout. And that puts him in our Bozo Hall of Fame.

Late last year, Salesforce.com invited a tiny company named Zoho to add its well-reviewed suite to AppExchange. Benioff knew that Zoho's productivity suite contained a CRM module, but given the vast disparity in the size of the two companies, it didn't seem to be a competitive issue. Delighted to play in the big leagues, Zoho quickly agreed. "We assigned an engineering team to do the integration, had a bunch of meetings and calls with their technical team, and with their full support we completed the integration work in about two months," says Zoho CEO Sridhar Vembu. But days before launch, Vembu got a call from a Salesforce.com vice president, who said the project was on hold and that Benioff would be calling. When the two men met in Benioff's San Francisco office, Vembu was shocked to hear that Benioff would not permit Zoho's suite to be offered on AppExchange (now called Force.com) because its CRM offering competes with Salesforce. But he'd be happy to buy the company. "I told him I had absolutely no interest in selling. The reason we've stayed private is to follow our own path," says Vembu. Moreover, Zoho is an engineering-driven outfit that would be a poor fit in the marketing-oriented culture of Salesforce. "Benioff's office must be 1,000 square feet; I couldn't imagine myself in that sort of environment," Vembu added. Fast-forward a couple of months and the two companies are talking again. Benioff dropped his offer of a buyout and said Zoho could play on AppExchange with one condition: kill Zoho's CRM application. Not surprisingly, Vembu refused, noting that CRM produces roughly 30% of Zoho's revenue. He even offered to rebrand the offering so it wouldn't benefit from traffic driven by AppExchange. Nope, not good enough, said Benioff. "I was furious because both Benioff and his team clearly knew we had a CRM offering going into this engagement, and if they had this as a pre-condition for us to integrate into AppExchange, we would never have put in the resources we did," says Vembu. Before going further, I should note that I called to get Benioff's side of the story but couldn't reach him. To be fair, Salesforce.com was in the middle of its annual Dreamforce show and it's not unreasonable to be told that the CEO wasn't available on short notice.

Despite his anger, Vembu was quiet about the incident. And then Dreamforce kicked off at San Francisco's Moscone Centre. During a session with reporters and analysts, Benioff said, "They [Microsoft] hate everybody and we love everybody, and that's pretty much the difference. We even love Microsoft. ... This is our core strategy, love." No doubt those remarks were somewhat tongue in cheek, but Vembu hit the roof, fuming about what he called Benioff's hypocrisy. "I respect his achievements, but we all have to play by certain rules." I'm really sorry that I couldn't speak to Benioff, because I find his actions baffling. If he really saw Zoho as a threat (hard to believe), why make the little company spend all that time and effort on integration? AppExchange is a great idea, and it is already giving developers access to a wide range of potential customers. But trust is an important component of any such arrangement. The tiff with Zoho aside, Dreamforce looks to be quite a success, drawing some 10,000 people, compared to 7,000 last year. What a shame that Benioff clouded the waters by acting like, well, Microsoft.