News

War in the Cloud

Redmond, Salesforce.com gear up for Platform as a Service duel.

• By John K. Waters
• 10/15/2007

Salesforce.com Inc. CEO -- and Microsoft nemesis -- Marc Benioff has been talking about the evolution of Software as a Service (SaaS) into Platform as a Service (PaaS) since at least last summer. He grabbed headlines when he made the nascent concept the cornerstone of his keynote speech at his company's Dreamforce 2007 developer conference in late September.

"The more time we spend on our platform, the more it feels like a startup again," Benioff told conference attendees gathered in San Francisco's Moscone Center. "Our platform is creating a new model."

PaaS is about offering an online platform complete with the application development, data storage and other tools required to run multi-tenanted, massively scalable applications, explains Ovum analyst David Bradshaw.

"Salesforce.com is already providing an online platform for the applications of its AppExchange partners, though some of them place most of the functionality on other servers," Bradshaw says. "Salesforce.com also has CRM customers who have developed their own applications and have them hosted by Salesforce. However, it's keen to extend this type of business further."

That's precisely what Salesforce.com is doing. The company is looking well past its core CRM business, already announcing Salesforce.com SOA, a Web services programming model that will allow customers to combine on-demand services with enterprise business processes and workflows.

On balance, Salesforce.com's efforts put the company in direct competition with Microsoft regarding cloud-based development.

In July, Microsoft Chief Software Architect Ray Ozzie gave a public presentation of the company's plans for a four-layer services-development platform. It consists of a data/networking tier; a "utility computing fabric" containing app-development frameworks and deployment infrastructure; a "Live Platform Services" layer for housing services that serve applications; and a top layer consisting of the applications themselves.

"Microsoft isn't dipping its toe in the water here," Gartner Inc. analyst Robert Desisto observes. "The company is getting into this Platform as a Service space aggressively -- and I think it has to."

Answering Apex
With Apex, Salesforce.com went a step ahead of Microsoft in the PaaS race. Microsoft plans to release its first multi-tenant CRM offering with the next version of Dynamics Live CRM (code-named "Titan") in 2008. As RDN reported in April, Microsoft CEO Steve Ballmer said that the platform will allow developers to use the underlying declarative programming model to write "your own Titan applications either on-premise, hosted or hosted in our data center."

Salesforce.com already provides its developers with the ability to customize objects through its Apex Code, a Java-like 4GL. Apex is designed to allow developers to write code that runs on the Salesforce.com servers, with no additional infrastructure requirements, to develop apps and features deployed entirely on demand. "That was Salesforce.com's big innovation," Desisto says. "And it's a critical differentiator."

But Microsoft says that it will provide that same object-customization capability. Microsoft also says its CRM strategy is unique because it emphasizes customer choice. The company provides several options for deploying its CRM system (SaaS or on-premise software), accessing the system (Office/Outlook, browsers, mobile devices) and paying for the system (perpetual licenses or subscription).

Winning Hearts and Minds
Salesforce.com clearly has the first-mover advantage in this market, says Desisto, but Microsoft has something that may prove to be more important in a platform play: developers.

"One of the key factors in the success of any platform is the people who use it," Desisto says. "And Microsoft's well-established and well-supported developer community is going to be critical here."

"I think there's some element of risk in this strategy for Salesforce," Desisto adds. "Microsoft is the big platform player who poses the biggest threat, and this is, to a large extent, their turf."

Pursuing the Enterprise Cloud

Vendors scramble for cloud-based market share. Momentum in the hosted-applications arena goes far beyond customer relationship management (CRM). On Sept. 30, Microsoft outlined its online strategy for organizations, differentiating for the first time between what it calls "Online" and "Live" services. The Online service offerings target enterprises with 5,000 or more seats, and include Exchange Online, Office SharePoint Online and Office Communications Online. A new research and development effort, Microsoft Exchange Labs, will focus on next-generation, large-scale applications, according to the company. The "Live" services are primarily for individuals or small business users. To that end, the announcement included the rebranding of Office Live, a suite of online apps targeted at orgs with 10 employees or less, to Office Live Small Business. Microsoft also announced Office Live Workspace, a new tool, which allows users to store up to 250MB online and share Office files. Part of the first wave of Software as a Service (SaaS), Office Live has had considerable success, although the original naming led many people to believe that it was Office online, which is not the case. "Microsoft reports north of 450,000 organizations using Office Live," says Peter O'Kelly, an analyst with the Burton Group. Counter Move The Sept. 30 announcements, coming on a Sunday no less, may have been a strategic counter to Adobe Systems Inc.'s Oct. 1 news. The company said that it had signed a definitive agreement to acquire Waltham, Mass.-based Virtual Ubiquity Inc., developer of a Flash-based word processor called Buzzword that also runs on Adobe's Integrated Runtime (AIR) on the desktop. Adobe also announced Adobe "Share," the code-name for an online file storage and sharing service, currently in beta. While some analysts see SaaS as primarily a consumer play, the Burton Group believes that organizations of all sizes are willing to embrace hosted services. "We actually see it across the whole continuum," says O'Kelly. "It's partly because organizations have had such bad experiences with applications such as CRM. Salesforce.com really broke through and showed people that they didn't have to deal with these kinds of problems on-premise." Service-based offerings often make a lot of sense for smaller companies and distributed orgs, asserts O'Kelly. Larger orgs are more apt to consider hosted solutions for utility applications such as e-mail and messaging, but less so for financial, accounting and ERP apps. by Kathleen Richards