CRM vendors discount Microsoft’s move

Microsoft Corp.’s push into the CRM (customer relationship management) market this week has not fazed vendors offering CRM as a Web-based service, who say their business model will not be affected by the move.

Microsoft earlier this week unveiled Microsoft Customer Relationship Management, a .Net-based CRM offering for small and mid-size businesses. Microsoft CRM will provide a single, integrated view of contacts with customers, working with Microsoft’s Office desktop productivity software and back-office systems from its subsidiary Great Plains Software Inc. and will be accessible from Microsoft Outlook or a Web browser, according to a company statement. The application will have functions for customer service and marketing.

Chief executive officers (CEOs) at UpShot Corp. and Inc. said their low-cost, service-based approach should continue to attract attention, despite Microsoft’s initiative.

“[Microsoft] hasn’t been attacking the real issue with CRM, which is that people are looking for fast results and fast implementations so they can get really good ROI,” said Rob Reid, president and CEO of UpShot in Mountain View, Calif. “This is a license model they are presenting, selling though distribution, so it will take time for users to evaluate it, get it rolled out, and it might be a year or two before [users] can get their return on investment.

“I don’t think that will impact our model here of delivering CRM over the Web through a hosted service,” Reid added. “We provide fast ROI (return on investment) and low cost of ownership and that advantage will be there for us versus Great Plains or any other traditional CRM vendors. We are also based on Microsoft’s .Net architecture. so you can easily move information from one system to another and cut down on time it takes to integrate systems.”

Marc Benioff, chairman and CEO of San Francisco-based, also said his CRM delivery model won’t be affected.

“We don’t make software,” Benioff said. “We are an online service with a different value proposition. We are a utility, which is low cost and easy to use.”

Microsoft Customer Relationship Management will be available either as a standalone product or integrated with Great Plains Dynamics, Solomon, and eEnterprise back-office products and sold in boxed or hosted versions, Microsoft said.

Redmond, Wash.-based Microsoft anticipates a vast opportunity to sell CRM systems to companies with from 25 employees to several hundred employees, said Holly Holt, senior product manager for global CRM for Microsoft in Fargo, N.D.

“When you have a market with less than 10 per cent of companies running a CRM solution, there’s an incredible opportunity,” Holt said.

North American users should see the product in the fourth quarter this year, sold by Great Plains’ usual resellers, or hosted by selected partners. Elsewhere, it will be introduced in phases starting in the first quarter of 2003. The price will be announced later this year, Microsoft said.

Microsoft took pains to reassure channel partners and integrators that this was not the start of a march into the high-end CRM market. The company will continue to address the needs of midsize businesses through its alliance with Siebel Systems, it said in a statement.

Market watchers, too, see little prospect of Microsoft muscling its way into the high end of the CRM market. SAP, Peoplesoft, and Oracle will continue to have the advantages of market domination, product maturity, and market reach, at least until 2004, according to Nick Hewson, director of strategic planning at Hewson Consulting in the United Kingdom.

“By 2004 the complexity of CRM projects will not have gone away and will be demanding more front- to back-office integration. I do not believe that this is a market that Microsoft can march into and take at will,” Hewson said.

Microsoft has an opportunity to win the business of small companies currently tracking customers via Outlook or Act, but has to convince these potential users that they can afford CRM, said analyst Erin Kinikin, vice president of CRM at Giga Information Group in Santa Clara, Calif.

“Microsoft has to avoid just making this a .Net showcase and really deliver compelling but simple applications,” Kinikin said. “The big danger is that they get so wrapped up in the technology, such as making Outlook sync work with all the SQL Server CRM data, that they lose track of the user.”

She added that companies such as UpShot and may see a gain in the year or so it takes Microsoft to carry out its CRM plan, but they ultimately could come under the company’s radar. “A lot of Microsoft-focused accounts are going to look at Microsoft for CRM,” she said.

A Siebel executive said Siebel is unaffected by Microsoft’s announcement, given that the company’s mid-market offering, Siebel 7 MidMarket Edition, is for companies larger than the ones Microsoft is pursuing.

“They’re targeting a totally different market,” said the executive, George Ahn, general manager of mid-market products at Siebel, in San Mateo, California.

Onyx Software in a statement Tuesday said that it believes Microsoft’s move will “have little or no impact on Onyx, its market position, or its existing partnership with Microsoft,” given the focus of Microsoft CRM on smaller companies. But Microsoft’s announcement “does represent validation of the overall CRM industry and the market opportunity it represents across all segments,” Bellevue, Wash.-based Onyx said. Smaller CRM companies may be impacted, the statement said.

Onyx and Microsoft have collaborated on various technologies and have multiple sales, marketing, and development initiatives under way, according to Onyx.

Microsoft already offers a number of CRM products for small and midsize businesses. Its hosted, subscription-based bCentral service offers e-mail, appointment, and customer service management. Other CRM software from its Great Plains division includes eEnterprise Field Service, for midsize customers in technology industries; Solomon Field Service, vertical-market system for heating contractors; and the co-branded Great Plains Siebel Front Office.