Salesforce.com to sell Google apps

Salesforce.com Inc.'s online software service is becoming a showcase for Google Inc.'s e-mail and other widely used applications, deepening a relationship that has spurred speculation Google eventually will buy its smaller partner.

Besides selling Google's programs to its 41,000 business customers, Salesforce.com will integrate the suite of applications into its own service, which helps companies track and identify customers' needs.

The agreement to be announced Monday builds upon several years of collaboration between Salesforce.com and Google, both of which are trying to persuade more businesses to subscribe to software services over internet connections instead of buying programs that must be installed on individual computers.

The online approach, sometimes called "cloud computing," represents a potential threat to bigger software makers like Microsoft Corp., Oracle Corp. and SAP AG that make most of their money from selling individual licences and then charging additional maintenance fees.

Salesforce.com chief executive Marc Benioff has become cloud computing's chief evangelist since he left Oracle to found his San Francisco-based company nine years ago. He believes his preaching will resonate even more with Google applications in Salesforce.com's platform.

"This will make it easier for us to convince more businesses to stop buying Microsoft Office and switch to better services like this that are emerging in the cloud," Benioff said.

The additional applications will help make Salesforce.com's service more attractive, but "the real winner here is Google," said Nucleus Research analyst Rebecca Wettemann. "This gives them a [business] sales channel" at no additional cost.

Salesforce.com also intends to sell customer support for Google's applications later this year.

Reports that Salesforce.com wanted to plug Google's applications into its service surfaced nearly a year ago, triggering chatter about a possible acquisition.

The takeover talk then cooled after Salesforce.com disclosed that it had merely retooled its service to make it easier for its customers to distribute their ads through Google's internet-leading search engine.

Benioff declined to comment about a possible sale to Google. Dave Girouard, who oversees Google's applications, also declined to comment about the company's interest in buying Salesforce.

Salesforce.com and Google have more in common than a passion for cloud computing.

Both companies have cultivated fun-loving cultures and set up philanthropic foundations funded by a portion of their profits.

And the stocks of both companies have soared more than fivefold since their initial public offerings in 2004.

With annual sales of $749 million US, Salesforce.com currently has a market value of more than $7 billion US.

That's well within the means of Google, which has a market value of $145 billion US and $14 billion US in cash. The Mountain View-based company's most expensive acquisition so far has been its recently completed $3.2-billion US purchase of internet ad service DoubleClick Inc.

Google's suite of applications includes word processing, spreadsheets, calendaring and instant messaging, as well as e-mail. All the programs are hosted over the Internet, which Google views as an advantage because users can access the applications from any computer with an online connection.

But the convenience hasn't won over most major companies, many of which worry about security issues and the ability to use the programs off-line. "There is still a big trust issue, rightly or wrongly," Wettemann said.

Google offers free basic versions of its applications and charges an annual fee of $50 US per worker for a deluxe package with more options.

More than 500,000 businesses and millions of people use the programs, according to Google. The company hasn't specified how many of the businesses pay fees for the premium applications.

The programs haven't been a big money-maker so far. Last year, Google collected less than $200 million from software licensing while raking in $16.4 billion US from advertising sales.