You can build your own cloud or piggyback on someone else's.
Late yesterday Salesforce CEO Marc Benioff announced that his company would do the latter in growing its capacity to offer core services — including Sales Cloud, Service Cloud, App Cloud, Community Cloud, Analytics Cloud and more — for the company's planned international infrastructure expansion.
"We are excited to expand our strategic relationship with Amazon as our preferred public cloud infrastructure provider," Benioff said in a statement. The announcement came on a day when Salesforce's stock hit an all-time high and just a day after it had set its previous record.
Big Deal for AWS
The deal is worth around $400 million, according to details revealed in Salesforce's most recent 10Q statement, although it did not specifically name Amazon Web Services (AWS) as the provider. Needless to say, the vendor is now confirmed. What this means is that Benioff has decided to opt for AWS over Microsoft Azure, Google Cloud and Oracle whose hardware is used to power the cloud Salesforce runs for itself.
"Microsoft and Google lost an opportunity to run Salesforce," Constellation Research analyst Holger Mueller told CMSWire. "But AWS had a leg up since so many Salesforce products like Heroku developer services, Salesforce IQ and the forthcoming IoT Cloud were built to run on AWS."
In published reports, Benioff is quoted as saying that "AWS is still ahead on its range of offerings and low prices," but added Salesforce might reassess its choice in one year.
The stakes are high, mind you. Benioff has predicted the deal could be worth billions of dollars in services over the coming years.
Effectively Allocating Resources
While Salesforce could choose to build its own data centers in places like Australia and Canada where AWS will be leveraged for now, there's a race to the bottom in the commoditized cloud business so it probably wouldn't make business sense — especially when you consider that Salesforce could use its resources to build higher value services.
"Salesforce will save capital expenditure on data centers that it can instead invest into product,” said Mueller.
Benioff has implied that, if the price was right, he might consider going all public cloud. "If Amazon, Microsoft and Google are smart, the price difference (between Salesforce running its services at scale in its own data centers) will change," he told the New York Times.
This news comes just a few weeks after Salesforce suffered a 20-hour CRM outage in which customers lost data, but it's not likely that this deal has anything to do with that, according to Mueller.
Salesforce and its Partners
For Amazon, the Salesforce deal is huge. "The last major catch for AWS was Infor, more than 2 years ago," said Mueller. And AWS, which initially earned its popularity among developers, is still building its enterprise credentials in a market that both Microsoft and Google are looking to come from behind and win.
Salesforce's sometimes contentious, sometimes cozy relationship with Oracle can't be overlooked. Salesforce's primary offerings, like those from SAP, run on its products. Salesforce seems to be looking to win its independence while Oracle insists that its cloud play is as good or better than anything anyone else has to offer.
"Now all eyes are on Oracle," Mueller told CMSWire."Does Oracle want to put the Salesforce IaaS on the Oracle Cloud? Now is the time to ink that deal - but that is all speculation."
Indeed. But those who have been watching Larry Ellison fight to dominate Enterprise computing would probably find it difficult to believe that he isn't busy plotting.