Microsoft Introduces CRM Live at Partner Confab

Published: July 12, 2006

by Alex Woodie

"We're not going to be out-hustled by anybody," Microsoft CEO Steve Ballmer said yesterday in introducing his company's latest software-as-a-service (SaaS) offering, Dynamics CRM Live, to thousands of business partners at the company's annual worldwide partner conference in Boston. Microsoft may be a little late for the start of the CRM SaaS game, but according to Ballmer, Microsoft and its partners will outplay an increasingly crowded field.

Approximately 7,000 partners are in Bean Town this week for Microsoft's annual shindig to get acquainted with changing strategies and to get motivated to sell. In his opening keynote, Ballmer laid down the situation in somewhat blunt terms, and warned partners to stay on top of changes. "Change is the nature of our industry. It's inevitable," he says. "We have to embrace it. The key is being willing to embrace it together."

Strategies change at Microsoft, too, Ballmer says, and these days, Microsoft has set its sites on three areas it considers key to its success: search and portals, unified communications, and security. "Those three businesses we want to build together," he says. But don't be fooled into thinking Microsoft wants to share with its partners all the work and rewards. Microsoft very much wants to build solutions in these key areas. This point was driven home through Ballmer's extensive use of the term "coopetition."

CRM Live is an area where Microsoft is looking to take the lead from companies that have already set the pace. Not all the details are in at this point, but here's what we do know about CRM Live. First, it will use the same code used by in-house deployments of Dynamics CRM and by partner-hosted implementations of the product, which will allow customers to move among the various deployment models. Second, it will feature an AJAX-style browser interface, hook into Outlook and other Office applications, and be accessible via a mobile client Microsoft plans to make available next month as open-source. Third, partners will be able to customize their customers' applications, and a single version of a CRM Live application, hosted in Microsoft data centers, will be able to support multiple customers (support for so-called "multi-tenancy"). Lastly, the new service is due in North America sometime between April 1 and June 30, 2007, and is part of the next release of the product, code-named "Titan," which may or may not be called Dynamics CRM 4.0 (see below).

"This is an offering I think most people would consider the single most inevitable announcement in the history of Microsoft," Ballmer said to enthusiastic applause during his keynote. As if there were ever any doubts.

In fact, there were doubts. At a financial analyst briefing in March, Doug Burgum, senior vice president of Microsoft Business Solutions, said the following during a discussion on the pros and cons of multi-tenancy in the Titan release ("or the next release that we have, which we're not calling 4.0, but it is the 4.0 release of Microsoft CRM"): "We have no announced plans and no intentions here to talk about or announce plans about ourselves hosting," he said according to a transcript of the call. "We've got what we call the . . . Software Provider Licensing Agreement (SPLA) out there for Dynamics AX and CRM, and there's plans to also add those for other Dynamics ERP product lines like GP and AV. And so again we're going to be pursuing this hosted-through-partners strategy."

In the end, Microsoft decided to pursue a strategy of hosting applications itself, as well as having partners host CRM implementations for customers. It isn't really that much of a stretch that Microsoft would look toward CRM SaaS to boost its fortunes on the Web. The software giant has to be envious of the success that Salesforce.com is having with selling on-demand CRM service to the small and mid size businesses (SMB) sector. Salesforce.com has to be considered one of the great success stories of the post-Y2K-bubble era. (The meteoric rise of Microsoft search foe Google, of course, is another.)

Microsoft follows in the wake of several other enterprise software companies that have tried to emulate Salesforce.com's success, including Siebel (now Oracle), which launched CRM OnDemand in 2003, and SAP, which took until early 2006 to launch its hybrid CRM SaaS delivery model.

While the SMB has powered most of the growth for Salesforce.com and its ilk, including RightNow Technologies and others, large enterprises are also looking to the Web-based delivery method. According to a 2005 study by AMR Research, 31 percent of big companies planned to purchase some hosted or subscription-based sales force automation (SFA) in the next 12 months. Microsoft's CRM customer base stretches from small customers to the largest enterprises; Microsoft itself is currently migrating from the Siebel CRM system to its own Dynamics CRM.

The Salesforce.com effect is also causing vendors to reconsider the Web for delivering other types of enterprise software, including ERP and supply chain management (SCM) software, according to analyst groups AMR Research and Gartner. However, at this point it's unknown whether Microsoft has any plans to deliver the rest of its Dynamics ERP suite via the SaaS delivery method.

CRM and human resources applications have been the most successful in SaaS, and one can't blame Microsoft for wanting a piece of this action. As Burgum said, Microsoft has agreements or plans to allow partners to host Dynamics AX (Axapta), CRM, GP (Great Plains), and NAV (Navision)--pretty much everything in the Microsoft Business Solutions (MBS) arsenal except SL (Solomon). But when it comes to taking chances and really driving innovation in the SaaS arena, as Ballmer hinted, one wonders if Microsoft possesses the initiative to capably drive SaaS deeper into ERP and beyond the likes of CRM, Office, e-mail, instant messaging, and blogging.