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Microsoft's CRM package: Better late than never

Microsoft may be late to the CRM ball, but it's certainly expected to make a grand entrance.

Microsoft may be late to the CRM ball, but it's certainly expected to make a grand entrance. Analysts expect the company to do well in the mid-range market, thanks to its marketing muscle and existing relationships with key resellers.

Observers seem split, though, on the question of whether Microsoft will start small and work its way up to the enterprise level or just stay put in the mid-market. For its part, Microsoft has been careful to position its upcoming package as a solution for medium-sized companies -- of up to 500 employees -- that are looking for CRM functionality.

The company is late on several counts, with the CRM due date originally slated for the fourth quarter of 2002. Then, too, several competitors have already staked out claims in the mid-market. These include Onyx Software Corp. in Microsoft's backyard of Bellevue, Wash.; Pivotal Corp. in Vancouver, B.C.; and J.D. Edwards in Denver.

Even with these players already existing, the mid-market is "still pretty open," said Kevin Scott, a senior analyst with AMR Research in Boston. No one vendor dominates, he adds, so there's room for Microsoft to move in.

Like many of Microsoft's other applications, CRM 1.0 will come in two editions: Standard, with prices starting at $395 per user, and Professional Edition, with prices starting at $1,295 per user. Plus, for Professional Edition there's a service/installation fee of $1,990. It must be implemented by a certified Microsoft partner, while the Standard package can be installed by the customer. Another option is for Microsoft to host the CRM application in its own facilities.

As might be expected, the Professional Edition boasts more features and functions than Standard, including work-flow rules, customization and integration with Microsoft's enterprise resource planning systems -- its own, to begin with, and Great Plains later this year. Both the Professional and Standard Editions became available this month.

All told, analysts expect Microsoft to do well in the mid-market. "The strategy is pretty sound," AMR's Scott said. And while he gives Microsoft high marks for a user-friendly interface, he said that its CRM functionality isn't as complete as, say, one of the packages that have been on the market for a while. "This is still version 1, and so there will be a lot more functions yet to come."

He expects Microsoft to do well in its existing customer base -- "people who want to buy into the Microsoft vision and would follow Bill Gates through the doors of hell," as Scott said. "Some won't buy it no matter what, because it is Microsoft."

Scott Nelson, a vice president at the Gartner Group in Stamford, Conn., said he expects Microsoft to "be successful in the longer term, but it will be a slow go." He said the company, as with any new software product, will need a few iterations to work out the kinks. "But the mid-market is rapidly growing, and within five years we expect Microsoft to be in the top five of all CRM players."

But Nelson doesn't expect Microsoft to try to work its way into larger accounts. "They may take some opportunistic chances there, but if they want to maintain their lower price point, they're not going to be able" to go high-end in any big way, he said. Plus the enterprise requires things like working in the Unix or Oracle environments that Microsoft just "doesn't want to deal with," he said. "The mid-range is a large enough market that they can do quite well enough, and have an opportunity to control their accounts."

AMR's Scott disagrees. "There are no huge enterprise deployments in CRM," unlike, say, in ERP. "There are some departments that have it, but there's no one CRM vision. There's opportunity here." And even the largest CRM players in the enterprise space don't dominate the market. Based on 2001 revenue, the largest is Siebel, with 18% of the pie, Scott said, with SAP coming in at a 5% share and PeopleSoft and Oracle trailing behind it.

With that much of a market waiting, Scott said it's only a matter of time before Microsoft muscles in. "They'll need to prove themselves in the mid-market first, and then they'll move up."

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