David & Goliath: Why Salesforce’s Last Ditch Effort to Hinder the Microsoft-LinkedIn Deal Makes Total Sense

There’s a storm a’brewing between two of the channel’s “favorite” companies: Microsoft and Salesforce. Earlier this year, Microsoft announced a $26.2 billion acquisition of the professional social network LinkedIn, beating out frenemy Salesforce. It’s the largest Microsoft acquisition in the company’s history, and it has far-reaching implications for the near future of business IT.

The deal has been approved by several countries including the U.S., but is now under scrutiny from the EU following concerns raised by Salesforce during the course of a routine investigation by EU regulators investigating the legality of the deal. 

The two companies started the year as buddies with the announcement of a wide-ranging partnership, despite Microsoft’s past litigation against Salesforce for patent infringement. Following the LinkedIn deal, however, relations cooled rapidly. Last month, Salesforce CEO Marc Benioff told Bloomberg Television that "when you’re going up against a Microsoft who has all the power and all the money and all the resources — and kind of that monopolistic control — you’re at a disadvantage."

Microsoft recently said in a statement that it expects the deal to close before the end of the calendar year, but a protracted EU investigation could drag the process out for months—a result that would probably tickle Benioff, given Salesforce’s latest comments to the European Commission.

Salesforce concerns echo those of E.U. regulators

“Microsoft’s proposed acquisition of LinkedIn threatens the future of innovation and competition,” Salesforce Chief Legal Officer Burke Norton said in a statement. “By gaining ownership of LinkedIn’s unique dataset of over 450 million professionals in more than 200 countries, Microsoft will be able to deny competitors access to that data, and in doing so obtain an unfair competitive advantage.”

The comments came in response to a questionnaire from the European Commission, the executive arm of the European Union. The routine questionnaire gives interested third parties, including competitors, a chance to voice concerns on proposed acquisitions.

Benioff didn’t stop with the commission questions. He continued his criticism of the deal on Twitter last week: “Amazing @ Scottgu says @ Microsoft 2 use @ LinkedIn data 4 anticompetitive bundles & denying access the data to rivals.” For those who aren’t fluent in Twitterspeak, that loosely translates to an accusation that Microsoft is blatantly planning to use the data it collects from LinkedIn to bundle products and block access to data to beat out its rivals.

Microsoft hasn’t passively accepted Benioff’s accusations. “We’re committed to continue working to bring price competition to a C.R.M. market in which Salesforce is the dominant participant charging customers higher prices today,” Brad Smith, Microsoft’s president and chief legal officer, told the New York Times.  Yeah, because we’re all so sure that Microsoft’s primary goal here is to save customers money.

As for the commission, Microsoft can expect intense scrutiny. The company has a rocky history with European antitrust investigations; we’ll remind you of its decade-long battle in the EU over not giving customers a choice in web browsers. The company reached an agreement in 2009, then promptly violated the settlement and had to pay a fine two years later.

Now, the EU is placing increasing levels of scrutiny on the use, including storage, of big data in the region. Back in June, antitrust chief Margrethe Vestager of Denmark said in regards to the Microsoft-LinkedIn deal that regulators would look at whether “the data purchased in the deal has a very long durability and might constitute a barrier for others, or if they can be replicated so that others stand a chance to enter the market.”

It isn’t just Microsoft’s purchase of LinkedIn that has raised red flags for EU regulators in terms of privacy. Though it eventually allowed the deal to go through, a large anti-competition debate surfaced two years ago when Facebook bought messaging app WhatsApp for $19 billion. Last month, Vestager ordered Apple to pay Ireland $14.6 billion in back taxes. She’s also spearheaded three separate charges against Google.

Vestager expressed concern over a few big companies controlling the majority of personal data in a talk in Brussels last week. “A company might even buy up a rival just to get hold of its data,” she said. “We are therefore exploring whether we need to start looking at mergers with valuable data involved.”

Big money in big data

The precedents currently being set when it comes to big data will carry billion-dollar implications. On Monday, analyst firm IDC released its Worldwide Semiannual Big Data and Analytics Spending Guide, which forecasts that the big data and business analytics market will grow from $130 billion by the end of this year to $203 billion by 2020. 

So the fight over who gets to control this vast repository of data isn’t a petty one. And when it comes to being outspent, acquisitions aren’t the only thing Salesforce has to reckon with. To add to the complications, strict privacy rules over where said data can be stored are prompting the tech giants to build data centers throughout Europe in order to avoid regulatory problems. 

During a gathering in Dublin on Monday, Microsoft CEO Satya Nadella announced that the company is building an Azure data center in Paris, joining other Azure farms in Germany, Ireland and the U.K.  According to Nadella, Microsoft has doubled its Azure capacity in Europe in the past year and is focused on addressing “legitimate data sovereignty and other compliance needs of European countries.”

It isn’t the only company racing to install global data centers in an effort to stay ahead of compliance demands from other nation-states. Last week, Google announced plans to add new farms in Mumbai, Singapore, Sydney, Sao Paolo, Finland and Frankfurt, and Amazon Web Services also announced plans for a new cloud data center in Paris.

If Microsoft wants to be able to glean insights from the data it collects from LinkedIn users in Europe, local data centers are key to that strategy. The company recently announced a reorganization that combines its massive research group with a number of product lines that center around artificial intelligence (AI), including its Bing search engine and Cortana virtual assistant. 

“Microsoft is really betting the company on A.I.,” Harry Shum, the Microsoft executive vice president who will oversee the new group, told the New York Times. 

If all goes swimmingly with the Microsoft deal, the data it will gain from LinkedIn will give it a significant advantage in its race to the top of the AI dog pile, especially when it comes to business product lines such as Skype and its Office suite. 

It’s no surprise that Salesforce is in a bit of a panic over Microsoft having control over all of that juicy data from LinkedIn. According to Gartner, Salesforce is currently the leader in customer relationship management (CRM) platforms, with 20 percent of the 2015 global market. In contrast, Microsoft lags behind with 4.3 percent, landing it the number 4 spot. But when Microsoft gets the LinkedIn data and is able to effectively leverage it, Salesforce’s position as top dog might not be quite as secure.

Whether Salesforce’s efforts to hinder the acquisition in Europe pay off or not, no one can blame them for trying.