Microsoft Outmaneuvers Salesforce For LinkedIn’s Data – Forbes
Last week, completed its acquisition of for $26.2 billion. After winning a purported bidding war with , Microsoft again battled the Customer Relationship Management (CRM) leader in front of EU regulators.
In reality, this battle wasn’t over CRM – at least, not directly. The stakes were much higher than that. In fact, the CRM card was a red herring that Microsoft played masterfully.
All About the Data?
Despite earlier rumors that Microsoft was interested in purchasing Salesforce as I reported in May 2015, and the buddy-buddy antics when Microsoft CEO Satya Nadella chummed up to Salesforce CEO Marc Benioff at the latter’s 2015 Dreamforce conference, the battle over LinkedIn appeared to turn the two software behemoths against each other.
According to Salesforce, this battle was over LinkedIn’s data. “If Microsoft gains ownership of LinkedIn, the company will have the ability and incentive to use LinkedIn’s one-of-a-kind dataset to enhance its own products, while preventing competitors from accessing and effectively utilizing that same data,” according to Burke Norton, Chief Legal Officer and Chief of Corporate and Government Affairs at Salesforce, in a blog post. “The result will fundamentally change the marketplace in a way that will be harmful to consumers.”
Microsoft’s top lawyer, however, dismissed this argument. “We’re committed to continue working to bring price competition to a CRM market in which Salesforce is the dominant participant charging customers higher prices today,” according to Brad Smith, Microsoft’s President and Chief Legal Officer, in an article for the New York Times.
It seemed, therefore, that the two sides in this argument were fighting two different battles: LinkedIn’s data or the CRM market. For Microsoft to win European Union (EU) approval of the deal, it had to show the acquisition wouldn’t stifle competition in the region, so it focused its argument on software rather than data.
EU regulators, however, realized the value of LinkedIn’s data – as well as the potential for the acquisition of the data alone to be anticompetitive. “Companies need to make sure they don’t use data in a way that stops others competing,” explained Margrethe Vestager of Denmark, the European Commissioner for Competition at a conference in Brussels in September 2016. “But that doesn’t mean there’s a problem, just because you hold a large amount of data.”
The EU, therefore, understands the balance between owning data and fostering competition. “We’re not here to get in the way of innovative ideas,” Vestager continued. “If companies need to collect large sets of data, or share data with their rivals to build better products, we don’t object to that. As long as they don’t hurt consumers in the process, by undermining competition.”
The Battle for EU Approval
From Vestager’s comments, one might assume that the EU would extract promises from Microsoft over limitations on how it might use LinkedIn data, in order for it to approve the deal. However, Microsoft’s concessions focused more on software than data. “As part of our discussions with the European Commission, we formalized several commitments regarding Microsoft’s support for third-party professional social networking services,” according to Brad Smith, President and Chief Legal Officer for Microsoft, in a blog post last week.
To be clear, these concessions focused on software. “We’ll continue to make our Office Add-in program available to third-party professional social networking services,” Smith continued. “If we develop a LinkedIn application or a tile for Windows PCs and include it in Windows, we’ll allow PC manufacturers to choose not to install them on their Windows PCs in the European Economic Area, or EEA. Similarly, we’ll ensure that users can uninstall the application and tile if they wish.”
The European Commission, which is the executive body for the EU, largely agreed with Microsoft’s positioning on this deal, and accepted these concessions. “The Commission also found that access to the full LinkedIn database is not essential to compete on the market,” according to an official European Commission press release last week. “Moreover, Microsoft is a relatively small player in the customer relationship management market, where it faces strong competitors, such as Salesforce, the clear market leader, and .”
Microsoft does compete in the CRM space with its Dynamics product, but it’s far behind the three vendors the Commission referred to above. Adding LinkedIn to the mix will certainly bolster Dynamics’ value proposition, but the Commission is correct that Microsoft will remain a relatively minor player in the CRM marketplace.
In fact, LinkedIn plays a far more central role to Microsoft’s strategy than a simple CRM play, as the following illustration from a Microsoft presentation on the merger illustrates.
Note that LinkedIn is not only central to the product strategy outlined above, but also that the strategy leverages Office, while Dynamics is nowhere to be seen. Leveraging LinkedIn data within Office, in fact, is the real story here.
Salesforce, in fact, warned against just such a strategy. “Microsoft is a particularly problematic acquirer of LinkedIn because of its ability to bundle LinkedIn data, not just with CRM applications, but with its existing dominant businesses — such as Microsoft Office,” Salesforce’s Norton said. “This is a familiar pattern with Microsoft.”
There is even a hint of sour grapes in Salesforce’s position. “If Salesforce had acquired LinkedIn, we would have used the data within our own services appropriately and also licensed it to others,” Norton continued. “The chances of Microsoft doing the same without government intervention are slim.”
At least one leading analyst also sounded an alarm. “The value of the deal (and the impetus behind competitors’ fears) is in that insight and in that network,” said R. “Ray” Wang, Principal Analyst and Founder of Constellation Research, in an article for CMSWire. “Microsoft can use that network to build very powerful insights across all industries and businesses.”
The Power of the Platform
Salesforce may have lost the battle over LinkedIn, but the war continues – and the war is over platforms. For its part, Salesforce has built an immense, cloud-based platform and associated vendor ecosystem. Central to that platform is the value inherent in the data Salesforce has about individuals and their relationships with Salesforce’s customers.
Microsoft has never had such a platform, although the success of Office 365 has given it an entrée. With LinkedIn added to the mix, Microsoft now has the pieces it requires to build a data-centric platform to compete with Salesforce’s.
To understand the power such a platform might bring to Microsoft, look no further than the LinkedIn Sales Navigator product. According to its web site, “LinkedIn Sales Navigator taps into the power of LinkedIn’s 450M+ member network to help Sales and relationship professionals establish and grow relationships with prospects and customers.”
LinkedIn – now Microsoft – offers LinkedIn Sales Navigator for both Salesforce and Microsoft Dynamics. Now that LinkedIn is part of Microsoft, the arms-length relationship with Dynamics is now an all-in-the-family relationship with Office as well as Windows, Bing, and other elements of the Microsoft empire.
The value LinkedIn can bring to corporate sales efforts is unquestionable. “Sales Navigator allows you to find hidden decision makers at large accounts and engage with them based on their activity,” according to Mike O’Neil, founder of Integrated Alliances and a two-time Forbes Social 50 Top Influencer, in an article for Forbes.
This product will continue to integrate with Salesforce, of course. Customers demand such integration, and regulators would be sure to demand it as well. But once this acquisition comes up to speed, the Microsoft platform will be driving sales and marketing activities for its customers, instead of Salesforce’s.
The result: Salesforce will be but one of many software vendors in Microsoft’s orbit, rather than the other way around. No wonder Benioff is pissed.
Intellyx publishes the Agile Digital Transformation Roadmap poster, advises companies on their digital transformation initiatives, and helps vendors communicate their agility stories. As of the time of writing, none of the organizations mentioned in this article are Intellyx customers.