You heard it here first. Microsoft won't phone Benioff to become his new best friend

But the nascent Salesforce-Google alliance may well force Microsoft to show its hand on cloud computing somewhat earlier than it planned.

With Google teaming up with Salesforce.com, might Steve Ballmer be tempted to phone up Marc Benioff and strike a similar deal? The short answer is no. The longer answer is more complicated.

Google's agreement to integrate its office productivity applications with Salesforce's customer relationship management software obviously is a big deal. In his prepared remarks, Eric Schmidt laid it on thick with his rehearsed line about the "old" business model being replaced by the "new" model. (Gee, I wonder who he has in mind?)

But industry politics are only part of the story. This new axis marks another signpost in the tech industry's slow march toward a future in which more--maybe one day, most--software applications eventually reside on the Internet. This hasn't escaped Microsoft's attention. Ray Ozzie recognizes that this is cloud computing's time.

Marc Benioff: Living on Cloud 9 in a Microsoft-free future. Dan Farber/CNET News.com

But my sources maintain that promoting Salesforce as the new industry platform isn't in the cards. Instead, Microsoft plans to go its own way and we should expect to see something out of Microsoft along the lines of what Google did with its app engine.

When he addressed financial analysts last summer, Ozzie offered an idea of a future of multilayered services where massive data centers underpin a cloud infrastructure services layer upon which all of Microsoft's online services would run.

"Among other services, this fabric has an efficient and isolated virtualized computation layer. It has application frameworks that support a variety of app models that are designed for horizontal scaling. And it has infrastructure that manages the automatic deployment and load balancing and performance optimization of the apps that it's managing running on its infrastructure.

It also supports several types of horizontally scalable storage types like files and database and searchable storage that are needed for different types of apps that you put onto this platform. And of course, you know, another key element is networking services where to efficiently serve up apps and content to Internet users worldwide in a very low-latency and efficient manner.

The next layer up from there is something that I refer to as the live platform services layer. And these are services that are designed specifically to serve the needs of apps, of our apps predominately, that targets individuals and very small businesses, unmanaged users. These are generally ad-monetized applications and because of that, there's synergy in sharing data and features among the apps at this level. And so they all share many, many of these services.

These are services like identity services, contact lists, this is the layer where our social graph of your relationships lives, your presence and rendezvous, communication services. Perhaps most importantly, our advertising platform infrastructure lives at this level.

So whether it's hosting our Live offerings for individuals or our service-based offerings that are more targeted for enterprises, or apps that are partners or customers will provide--this platform will ultimately be used by and will benefit all of the audiences that we as Microsoft serve because each audience is undergoing some transformation that's relevant to them from software-based solutions to software plus services, or services alone."

Kip Kniskern last week found a Seattle-area job posting (since removed) that called for candidates to something akin to an answer to the Google App Engine type service. Until now, Microsoft could be its deliberative self and take its time figuring all this out. After today's Google-Salesforce pact, there's new urgency to do it sooner, rather than later.

In the meantime, not everyone believes Salesforce and Google are about to set the world on fire. On the Zoho blog, Sridhar Vembu dished that Salesforce "pulled the plug" on a joint project to make Zoho work with AppExchange and then offered to buy Zoho outright. I should note that the Zoho products also compete against offerings from Google and Salesforce. I later spoke with Vembu, who argued that the companies' different pricing models, not to mention their different corporate cultures, will put a strain on the nascent partnership.

"Salesforce costs $700-1,000 per year per user, more than 10x Google Apps subscription cost. When Salesforce resells Google, if it confines itself to its CRM user base, even assuming that it retains the entire Google Apps subscription cost, it is at best a 10% improvement. It is almost a loss leader for Salesforce."

Yet, when a smaller company has a larger company's product as a "loss leader," the situation is inherently unstable. Now, Salesforce can aim for an entire company's employee base for Google Apps, not just the CRM users, but then such a deal would marginalize the CRM component in the whole equation (both from a revenue perspective as well as from the effort expanded to win the deal). It is hard to see Salesforce marginalizing its own product in order to sell the Google suite."

Maybe. In the meantime, though, Google has gobs of money and can afford to test whether Salesforce will give its apps greater entree into the business world. (And if the experiment blossoms into a success, expect the "Google to buy Salesforce" rumor to again make the rounds.)

When I asked Benioff after Monday's press conference whether he believed Google's application suite was better than Microsoft Office, he kept a straight face and said yes. Give a good salesman his due but at this point Google's apps don't really need to best Microsoft in a feature-by-feature competition. For Google, every user it can steal away from Microsoft is worth the trouble. If Google wins over enough of them, Eric Schmidt can always tell his minions to add more features. Life on the cloud is a lot easier to manage.

Here are some other useful links to reference for different takes on this story:

Larry Dignan

Erick Schoenfeld

Robert Scoble

Dan Farber

Ben Worthen

 

Join the discussion

Conversation powered by Livefyre

Don't Miss
Hot Products
Trending on CNET

HOT ON CNET

Looking for an affordable tablet?

CNET rounds up high-quality tablets that won't break your wallet.