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Microsoft sees homegrown CRM as its biggest competitor

If Microsoft is going to succeed as a CRM vendor, its biggest challenge won't be in luring organizations away from competitors but in getting them to move away from CRM systems that were developed in-house, a company exec says.

With its inaugural CRM offering due to arrive before the end of the year, Microsoft Corp. is betting that custom-built systems stand as the firm's greatest roadblock to rapid midmarket penetration.

According to Holly Holt, senior product manager for Microsoft's CRM unit, the company's biggest challenge will not be in replacing another vendor's software, but in swaying potential customers away from their homegrown applications. Microsoft believes its target audience of companies with 50 to 500 employees is unsure about investing in packaged CRM products.

"People with homegrown systems have a different perspective; we have to convince these organizations that we can add real value," Holt said. "We're targeting customers whose existing efforts around CRM tend to be very customized and who don't migrate to new platforms quickly."

Holt believes that Microsoft's best argument for courting customers is that its .NET architecture will offer increased flexibility and allow users to upgrade CRM systems more easily than heavily customized applications. Microsoft currently has 35 partners running beta versions of its CRM software, with an additional 32 customers in some stage of implementation, according to Holt.

Some of Microsoft's potential competitors agree that the biggest battle the vendor may face will be convincing midsized companies that they need CRM at all. Greg Colley, president and CEO of midmarket vendor Clear Technologies Inc., Coppell, Texas, said his greatest challenge is often in evangelizing CRM to budget-minded customers.

"We still find ourselves trying to convince midmarket executives that CRM is a competitive advantage and not just a luxury item," Colley said.

For its part, Clear has aligned with IBM Corp. to market CRM to reluctant takers.

Another struggle for Microsoft may be the perception that its first CRM software release will bear predictable shortcomings as a Version 1.0 product. The operating system software giant is pledging that expertise gained through its acquisition of Great Plains Business Solutions of Fargo, N.D., along with employees it has wooed away from other CRM vendors, will prevent major missteps.

"It's a version 1 product, but in some ways it isn't," Holt counters. "We've built a lot of CRM experience and we're leveraging expertise from across Microsoft."

Ben Holtz, president and CEO of Green Beacon Solutions, a Watertown, Mass.-based midmarket consulting and systems integration firm, believes that Microsoft has developed an offering that should appeal to many users. Holtz is in the process of transforming Green Beacon into a regional Microsoft CRM specialist. For the most part, Microsoft will depend on such resellers to give midmarket customers the personal attention they're accustomed to.

"Savvy CRM users might be disappointed when they first see Microsoft's product," reseller Holtz said. "But for new users it should be pretty interesting. The software is not quite there yet, especially lacking the marketing automation piece, but it is a great first attempt."

According to Holtz, whose company has worked primarily as a consultant around products from midmarket CRM provider Onyx Software Corp., Bellevue, Wash., Microsoft's software should create a whole new sector of CRM customers. He feels those drawn to the platform will be those shops that have passed on technologies from Onyx and SalesLogix, Irvine, Calif., because they cost too much to maintain.

Last week, SalesLogix upgraded its software with a new architecture for open development and rapid deployment, which it says is more compatible with Microsoft's .NET development platform.

"If Onyx or SalesLogix are running into Microsoft in the bidding process, someone is in the wrong place," he said. "That doesn't mean Microsoft won't try to take business from these guys in the future, but right now they're looking at those organizations who haven't even seriously considered CRM in the past."


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