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Mid-market heats up as SalesLogix and Microsoft ready new software

Is the CRM mid-market big enough for SalesLogix and Microsoft? Both companies are arming themselves with new software for a mid-market battle.

Over the next few months, the small-to-medium business (SMB) market for CRM should see more activity and attract more attention than ever. In two weeks SalesLogix, Scottsdale, Ariz., will debut a new version of its CRM product and, in December, Microsoft Corp. plans to unveil its inaugural set of applications.

For SalesLogix, the focus will be on adding functionality for its established customer base and luring newcomers with its five years of CRM experience. Microsoft will try to build on the near omnipresence of its Office suite, its deep pockets and its wide array of partnerships.

Version 6 will be the first upgrade since March 2001 for SalesLogix, a subsidiary of Best Software in Irvine, Calif. It will focus mainly around improved architecture, customization and integration capabilities.

Critics have already jumped on Microsoft for delaying its CRM release two months. They say this mirrors the issues that have dogged Microsoft in the operating system business, where the company dominates despite sometimes glaring miscues, particularly around new product introductions.

According to Tim Fargo, general manager of SalesLogix, the biggest advantage his company will have over Microsoft is its experience with SMB customers. Fargo estimates that SalesLogix has 4,600 existing customers and considers more than 1,800 feature requests from users when crafting any major release.

"It's difficult to come up from ground zero and re-create that sort of interaction merely through holding focus groups and developing beta sites," he said.

Another major sticking point, Fargo said, might be Microsoft's ability to develop the right mix of channel partners to penetrate the SMB sector. Smaller businesses are notorious for their ties to local distributors who are able to give them more attention than their larger channel brethren. Out of the gate, Microsoft will leverage its Great Plains Business Solutions Division in Fargo, N.D., as its primary North American channel. In Europe, it will work through the recently acquired Navision, which is based in Vedbaek, Denmark.

"The real low end of the market, where Microsoft is aiming right away, is a retail market, and they're going to try to reach it through a reseller in Great Plains," Fargo said. "[Microsoft] is going to find itself straddling several channel models very quickly as it tries to address different sectors within the small and mid-sized space."

Experts agree that building the right partnerships will be crucial to Microsoft's early success. Karen Smith, research director at Boston-based Aberdeen Group, said it shouldn't take long for the software maker to figure out how to go to market.

"Obviously, its name will open a lot of doors quickly," she said. "The key will be for [Microsoft] to choose the most effective channel companies to serve customers interested in Microsoft CRM."

She said it is also critical that SalesLogix extend its own network of resellers to compete against Microsoft. However, Smith noted that Microsoft's presence is already being felt in the SMB arena, where she sees the Redmond, Wash., software giant as the ultimate wild card.

"You've got a company with no product as of yet, but we're already seeing potential CRM buyers put off vendor selection as they wait to see what Microsoft's debut is all about," Smith said.

Ultimately, experts say, the opportunity in the SMB space should be large enough to support efforts from both vendors, provided they can each strike a chord with buyers. Smith estimates that less than 30% of mid-market businesses have CRM and even fewer small companies do.

"The real opportunity right now is to [help SMB users] cut costs," she said. "What could make or break these vendors is their ability to show success in making front-and-back office applications more effective."


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