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Microsoft finally reveals CRM hand

Microsoft's decision to offer CRM to the mid-market may mean that it actually has its sights set on a broader batch of applications, including ERP, supply chain management and employee relationship management.

Microsoft has finally revealed its CRM hand with the news it will later this year launch Microsoft CRM, the first business application built on its emerging .NET architecture. Microsoft has tapped into its ERP applications subsidiary, Great Plains, to sell and support the system, which will be tailored exclusively -- for the time being, at least -- for small and medium-sized companies with revenues under $1 billion.

The move marks something of an epiphany for Microsoft, which has long harbored ambitions of extending its presence in the operating systems, database, browser and front-office productivity applications into the back-office business applications market. Microsoft CRM, which will be available in North America at the end of the year and elsewhere at the start of 2003, represents the first step on a long road to filling out its back-office strategy. Conceivably, that journey won't end until Microsoft has the full gamut of business applications -- ERP, supply chain management, employee relationship management and so on -- under its belt, all built on .NET and fine-tuned for end-to-end Microsoft database, OS, Web browser and front-office environments.

For the time being that vision is but a dot on the landscape, and Microsoft executives were eager to position the immediate "untapped" opportunity that midmarket CRM presents. Holly Holt, senior CRM product manager at Microsoft Great Plains, said less than 10% of companies with under $1bn in revenue currently have a CRM system. The majority of these companies, Holt suggests, need a broad CRM solution -- encompassing areas such as sales, service and marketing -- although they don't need the depth of a full-blown CRM system from the likes of Siebel, SAP, Oracle, PeopleSoft and others.

Accordingly, Microsoft CRM, the first combined product since Microsoft bought Great Plains in December 2000, is for those companies just under the "enterprise" space and below. Built on .NET, it has been constructed as a single integrated CRM system. "Their number-one priority is 'fix my sales pain,'" says Holt of the target market.

Thus, the emphasis is on sales force and service automation, which can either integrate into Great Plains' ERP suite or other applications or legacy systems. The suite does contain some basic marketing functionality, but further features, such as customer self-service, will arrive a couple of months after general availability. Microsoft CRM will be available as a stand-alone product or as part of the Great Plains suite. Access will be via Microsoft Outlook or a Web browser (Internet Explorer only), and can be implemented either on-site or through hosting partners. It will be sold through Microsoft Great Plains' partner channel, with support provided by partners and Great Plains itself. Pricing will be announced during the summer.

While the move looks good for Microsoft -- its entrance into the CRM market has long been a question of when, and not if -- the outlook for other struggling CRM players looks grim, especially if Microsoft happens to be your biggest partner. Microsoft, however, puts a different spin on it. It says the likes of Onyx and Pivotal, which have largely built their businesses on Microsoft technology, have long been focused on moving up into the enterprise market, even before the Great Plains acquisition. Although this is true, Onyx and Pivotal could still find themselves facing Microsoft in the gray area where SME stops and enterprise picks up.

Then there's Siebel, whose midmarket CRM product that Great Plains already sells appears to address the very space that Microsoft CRM is now targeting. Microsoft says it will continue to sell the co-branded Great Plains Siebel Front Office suite, although Siebel's apparent lack of appetite for the midmarket may have provided Microsoft with a convenient reason to curtail the deal. Siebel declined to comment on the announcement.

Microsoft's move also present interesting challenges to other businesses that profess to target the exact same area that Microsoft CRM will. Web-only players such as and Oracle's Small Business Suite, as well as other Microsoft-based vendors such as Accpac, Sage (with Interact Commerce) and FrontRange Solutions, can no longer afford to lightly dismiss the prospect that Microsoft might one day want to eat their lunch.

With its hand now exposed, it is hard to see where Microsoft will stop. It will likely confine itself to SMEs short term, but the company has clear ambitions to establish itself as a fully rounded enterprise-level player. It has already taken on the established giants in server operating systems and databases with a remarkable degree of success, so why not take on SAP, Oracle, PeopleSoft and JD Edwards in the back-office applications space? With a CRM application in the offing, Microsoft will next prepare the other applications in the Great Plains stable for the .NET treatment, starting with ERP.

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