This week we saw lots of new apps and activity around Salesforce, as expected, given its Dreamforce conference. But it reminded us of why it will continue to dominate the CRM space, and why Microsoft's own CRM offerings - despite some solid foundations and active users - still don't measure up by comparison.

(This article is a companion piece to analysis by Scott Fulton, which can be found here.)

First off, as my colleague Scott Fulton reminds me, Microsoft is like someone who can solve Rubic's Cube but who only knows how to get one side all one color at any one time. It could do several things to beat Salesforce, one of which is to completely embrace the SaaS model of applications.

But going 100% SaaS would end up sending a shot of poison to Office and to some degree Windows itself. This is Microsoft's second challenge: its legacy on the desktop and in packaged software will always be a reminder that this is where the profits lie, no matter how many cloud-based initiatives and press conferences it has weekly. (More like weakly.)

Microsoft would say, and rightly we think, that its justification for Windows on the client side - rather than some Web browser -- is that it runs the applications that businesses use and that most of us feel comfortable with. But the dynamics, if you were, are changing and the balance between the Web and Windows is changing. When was the last time anyone cared what OS you ran on your work PC? Is that so, 1997?

Finally, as the Web takes more mindshare of its developers, Microsoft still needs to support a vast army of legacy server businesses, such as Sharepoint, Exchange, and even its own Web server IIS. These aren't going away anytime soon, and indeed, the smarter developers are putting in hooks to various Salesforce apps from these servers as ways to embrace and extend this legacy. Harrumph - usually Microsoft likes to be in that driver's seat, and doing the embracing to keep its lock on its APIs.

So what can Microsoft do to become a force (ahem, sorry) to be reckoned with? It needs several things:

  • First, make it easier to bring in Salesforce data into its own ecosystem.
  • Second, consolidate all its numerous Live services so that one account can connect to all of them. Try using Live Mesh, Skydrive, and Hotmail for any length of time and you'll see what we mean.
  • Come out with extensions to Silverlight and Visual Studio that make it the easiest and happiest place on the planet to build apps. He with the best tools wins developer mindshare.
  • Finally, play nice in the HTML5 leagues and stop trying to set the agenda here. We don't want a replay of the Netscape scenario back when HTML was young. Accept the fact that Microsoft is just one player of many, and not in the lead here.