Microsoft Ignites Huge Debate with CRM Launch

by Kristin Palitza

Microsoft's new CRM application will be much simpler than the technically, highly sophisticated CRM suites from the large CRM vendors. Those complex packages are targeted at large enterprises, which are willing to pay a high sum for a multi-functional CRM system, including sales force automation, campaign management, call-center software, customer data tracking, and sales and marketing. Microsoft's Great Plains unit, in contrast, will provide its CRM tool to smaller firms for a Microsoft-typical, very affordable price, but therefore offer very basic functionality, such as marketing, contact management, and some opportunity management.

Microsoft acquired Fargo, North Dakota-based Great Plains in December 2000 for $1.1 billion in its quest to enter the application business and offer software to medium-sized businesses in addition to its traditional target group, smaller firms. Last October, Great Plains already hinted Microsoft's move into CRM when it revealed its plans to add .NET functionality to its software via developer technologies and Web-based services.

Microsoft stressed the fact that it does not aim to compete with the large CRM vendors, and existing partnerships will continue as they were. One of Microsoft's most important CRM partners is colossus Siebel Systems. Great Plains is reselling Siebel's CRM software. Siebel does not feel threatened by Microsoft's move into the CRM arena. "Our CRM offerings do not compete and target separate markets with different needs," a Siebel spokesperson said, adding that the partnership will continue.

Another Microsoft CRM partner, Onyx Software, made a similar statement. "Microsoft's entry into the CRM market will have little or no impact on Onyx' business," the CRM vendor reckons. Bellevue, Washington-based Onyx and Microsoft have multiple sales, marketing, and development initiatives under way to deliver CRM to medium-sized and large enterprises. Microsoft's offering will clearly be geared towards small and medium-sized companies, Onyx said, and therefore not interfere with Onyx' target group of large enterprises. While Onyx does not anticipate that Microsoft's move might impact itself, it said it believes that the giant might "effect the low-end CRM vendors sometime in the future."

Gartner Group, Inc. analyst Joe Outlaw agrees, saying Microsoft will rival CRM vendors that sell applications to small firms, such as Interact Commerce, FrontRange Solutions, Epicor Software, Oncontact Software, and Multiactive Software.

However, it might be possible that the large CRM players and Microsoft clash on some level--when they fight for medium-sized customers, that has to make the choice of either going with a cheaper, but basic CRM application or with a full-grown CRM suite as a long-term investment. Giga Information Group analyst Erin Kinikin said that Siebel might indirectly lose business to Microsoft. "Smaller groups of some large enterprises might sneak some Microsoft CRM into their Siebel system, because it's cheap and easy," she said.

In the short-term, though, Microsoft cannot be a rival to the large CRM vendors, even if it wants to be, simply because it will not have a CRM product on the market before the end of this year. Microsoft won't be able to release a full-fledged CRM suite in the next three years, analysts reckon. In addition, Microsoft does not have a direct sales force, which is necessary to sell CRM successfully to large corporations.

Microsoft's CRM package will be tailored for businesses with 25 to several hundred employees and will not provide the customization that high-end systems entail. The software giant says it sees a huge opportunity in the "not saturated" small business CRM market. CRM is seen as one of the most important markets in the IT industry, where a lot of money can be made. Researcher Giga estimates that CRM for the mid-market (fewer than 1,000 employees) will grow to $1.4 billion in licensed revenue by 2005, up from less than $500 million last year.

Before Microsoft will get a piece of the CRM pie, it will have to prove that it is really in the application business, Kinikin said. "Microsoft has to avoid just making the CRM launch a .NET showcase. Great Plains has not grown much in the past year. Microsoft might not know the applications market well enough," she said.

Customer management is not an entirely new field for Microsoft. The new CRM application will add to customer-centric products such as bCentral Customer Manager, Microsoft iCommunicate, Microsoft Great Plains eEnterprise Field Service, Microsoft Great Plains Solomon Field Service, and Great Plains Siebel Front Office.

Gartner's Outlaw predicts a rosy future for Microsoft's CRM strategy. "Microsoft CRM should [...] be happily embraced by smaller businesses for its cozy familiarity," he said. Microsoft offers basic functionality "without the worries of handling a complex set of CRM tasks." Gartner believes that Microsoft's CRM software will appeal to smaller firms because it will be affordable, easy to use, and fully integrated with other Microsoft suites. However, Gartner believes that the first release of the Microsoft suite is not suited for small to midsize businesses that must manage multiple lines of business customer activities in varying ways on the same application, nor that its does enable tight call-center integration.

Customers will be able to access Microsoft CRM through Outlook or the Internet. Microsoft CRM will be available as a standalone product as well as an integrated solution to Microsoft Great Plains' back-office software Dynamics, Solomon, and eEnterprise. It also integrates with Microsoft Office, the Redmond, Washington-based company said.

The CRM tool is expected to ship in North America in the fourth quarter of 2002. Availability outside of North America will be phased and will begin in the first quarter of 2003. It will be sold and implemented through Microsoft Great Plains' reselling partner channel. Pricing is yet to be determined, Microsoft said.