December 6, 2010 / 9:03 PM / in 7 years

Microsoft offers Salesforce users money to switch

SEATTLE (Reuters) - Microsoft Corp is offering customers of Salesforce.com Inc thousands of dollars in rebates to switch over to its own customer relationship management system.

In an advertisement placed in the U.S. West Coast edition of the Wall Street Journal on Monday -- timed to coincide with the start of Salesforce.com’s annual ‘Dreamforce’ user conference in San Francisco -- Microsoft is offering companies $200 per user to move to its product.

The incentive, to be used as a rebate on the cost of transferring to Microsoft’s system, could add up to tens of thousands of dollars or more for some companies.

Microsoft’s move is the latest in a lively rivalry between the two companies, vying over the emerging role of “cloud computing,” or providing computing power and applications over the Internet.

Salesforce.com, which sells programs to organize companies’ contacts with its customers, is a leader in the “cloud” and aggressively campaigns against the use of installed software, which is Microsoft’s stock in trade.

Microsoft has countered by taking many of its services online and now offers alternatives to Salesforce.com’s products using a combination of installed software and databases accessed online.

“At Microsoft, we do not believe you should be forced to pay a premium to achieve business success,” Microsoft executive Michael Park wrote in an “open letter” to Salesforce.com customers, which appeared as an ad in the Journal on Monday.

In the letter, he urged customers at the Dreamforce conference to ask Salesforce.com to justify its prices and service.

Salesforce.com said it had not yet seen any of its 87,000 customers cancel as a result of Microsoft’s offer and dismissed the ad as the ruse of a struggling competitor.

“The ad marks a new decade of desperation from Microsoft,” said Kendall Collins, Salesforce.com’s chief marketing officer. “The fact that the ad is centered on pricing and a rebate, it’s just a very desperate strategy from a company that clearly does not have a good product.”

Collins said the timing of the ad acknowledged that Dreamforce -- attended by 30,000 people this year -- was the world’s most important cloud-computing event and likened Microsoft’s customer relationship management product to its unpopular Zune.

“Microsoft’s CRM is doing for CRM what the Zune has done for music players,” he said. “It doesn’t bring any innovation, it doesn’t bring a new vision, it brings an inferior product at an inferior price.”

Microsoft’s online CRM product usually costs $44 per user per month, although it is currently offering an introductory year at $34. Salesforce.com’s comparable offerings start at $65 per user per month, with its most popular product priced at $125.

Salesforce.com Chief Executive Marc Benioff has long been a strident critic of Microsoft, which he has referred to as a technology monopolizer and “patent troll.”

Earlier this year, the two companies settled a patent disagreement over who owns the technology behind their respective systems.

Microsoft shares, which are down 12 percent this year, fell 0.7 percent on Nasdaq. Salesforce.com shares, which have almost doubled this year, rose 1.7 percent on the New York Stock Exchange.

Reporting by Bill Rigby; editing by Andre Grenon

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