Microsoft, Conflict Suggests Future Cloud Battles

August 6, 2010 Off By Hoofer
Zerto Gartner Report
Grazed from eWeek.  Author:  Nicholas Kolakowski.

Microsoft and may have settled their very public disagreement over intellectual property, but the feud could be an indicator of things to come in the enterprise cloud space, where a number of vendors are engaged in ever-fiercer competition for business clients.

“As you take a look at how the sundry vendors approach the cloud, they love to talk about interoperability and open platforms, but those open platforms come with a lot of inherent walls built around them,” Charles King, an analyst with Pund-IT Research, told eWEEK in an Aug. 5 interview. “The fact of the matter is heterogeneity is a fact of life among the enterprise clients these vendors are trying to attract.”

With those clients choosing multiple cloud solutions for the workplace, the potential for vendor overlap with regard to technologies—and the intellectual property that underlies them—only increases.

“The vendors are going to have to find a way to work together effectively,” King said. “The dustup between Microsoft and Salesforce may be a portent of things to come, as the vendors work out their battles over who-owns-what and who moves ahead.”

That being said, he added, out-of-court agreement between the two companies “could be an indication of how soft the economy’s been—companies realize that working out some sort of compromise and payout is preferable to engaging in months of litigation.”

Microsoft and Salesforce announced Aug. 4 that their mutual patent-infringement lawsuits had been settled out of court. “ will receive broad coverage under Microsoft’s patent portfolio for its products and services as well as its back-end server infrastructure during the term,” read a statement issued by Microsoft. “Also as part of the agreement, Microsoft receives coverage under’s patent portfolio for Microsoft’s products and services.” is compensating Microsoft, but the exact amount remains undisclosed.

“We are pleased to reach this agreement with to put an end to the litigation between our two companies,” Horacio Gutierrez, corporate vice president and deputy general counsel of intellectual property and licensing at Microsoft, wrote in an Aug. 4 statement. “Today’s agreement is an example of how companies can compete vigorously in the marketplace while respecting each other’s intellectual property rights.”

The two companies’ conciliatory statements—Salesforce released one of its own, stating it was “pleased to put this litigation behind us”—represents a sea change from earlier this summer, when Salesforce CEO Marc Benioff called Microsoft a collective of “patent trolls” and “alley thugs.”

Microsoft’s initial lawsuit, filed in May, alleged that the cloud-computing company had violated nine of its patents. Salesforce fired back in June, insisting that Microsoft had infringed on five patents. As the conflict between the two companies edged toward what seemed an epic courtroom battle, Salesforce retained David Boies—who originally represented the Justice Department in its landmark suit against Microsoft—as counsel.

Some analysts see the conflict as first and foremost a licensing play, with Microsoft seeking to monetize its large patent portfolio.

“Microsoft is just sort of regularizing the relationship,” Roger Kay, an analyst with Endpoint Technologies Associates, told eWEEK in an Aug. 5 interview. “There was initial hostility on Microsoft’s part because Salesforce upended some assumptions in the Microsoft world and set the pace in a certain domain.”

With that in mind, Microsoft may have begun exploring how Salesforce’s technology potentially conflicted with its own existing technology—leading, ultimately, to the late unpleasantness.

“If you look at what Microsoft is trying to do overall, it’s trying to monetize its patent portfolio,” Kay said. “But it’s also trying to come to agreements so it doesn’t reach litigation. In the end it comes down to a question of licensing peace.”