Microsoft stepping into CRM market

Microsoft Corp.’s expansion strategy extended to the business applications space last week, when the company announced plans to offer customer relationship management (CRM) software.

The software maker also recently confirmed its intention to explore new offerings in enterprise storage and security, even going to the extent of creating business divisions devoted to those areas.

Microsoft Corp.’s foray into CRM will be executed through its Great Plains Business Solutions group, which specializes in business management applications for small and midmarket companies. Microsoft completed its acquisition of Fargo, N.D.-based Great Plains Software Inc. in April of last year.

Microsoft’s new CRM offering, which is due to ship in the fourth quarter, is aimed at companies with 25 to 1,000 employees, according to senior product manager Holly Holt. She said customers will have two ways to enter the product: through Outlook mail clients or through Internet Explorer browsers.

Big Impact

“It could certainly have a huge impact and really open up the lower end of the market for smaller-size to medium-size businesses,” said Mary Wardley, an analyst at IDC in Framingham, Mass. Many of those firms have Microsoft infrastructures and use Outlook, she noted.

Jim Prevo, CIO at Green Mountain Coffee Roaster Inc. in Waterbury, Vt., an Exchange Server and Outlook user, said he sees the product as a potential “logical add-on” for his company. “We’d have to integrate it with our ERP back end, but it is worth a look,” he said.

Analysts said they don’t expect Microsoft to take on the enterprise CRM offerings from vendors such as Siebel Systems Inc., SAP AG, Oracle Corp., PeopleSoft Inc., Onyx Software Corp. or Pivotal Corp. in the foreseeable future.

Microsoft’s product has only basic functionality compared with the feature-rich sales, customer service and marketing automation capabilities of the software from the major players, said Joe Outlaw, an analyst at Stamford, Conn.-based Gartner Inc. Microsoft’s product, for instance, isn’t designed to support multiple lines of business, he said.

But, Outlaw added, “I have no doubt that they will gradually add more and more functionality to the product to make it appeal to larger and larger companies.”

Roots in Logistics

Great Plains entered the CRM space in 1997 with a logistics-intensive field service product to manage the dispatch of technicians to repair jobs. Two years later, the company forged a relationship with San Mateo, Calif.-based Siebel Systems to get its name on Siebel’s midmarket CRM product, calling it Great Plains Siebel Front Office, Holt said.

Holt said Microsoft’s CRM technology won’t have the sales channel management or telemarketing campaign management capabilities that Siebel MidMarket Edition has. Microsoft’s product will handle only e-mail campaign management, she said.

According to Erin Kinikin, an analyst at Cambridge, Mass.-based Giga Information Group Inc., “It’s not clear that midmarket companies want or can afford all the functionality that Siebel MidMarket gives them.” She added that “the dirty secret of CRM is that most companies only use about 20 per cent of the functionality.”

“The CRM midmarket has been crying for a market leader,” Kinikin said. “Siebel and the big ERP vendors are too complex. And none of the midmarket vendors are a good long-term viability bet. None are profitable.”