Microsoft throws hat into hosted CRM ring

While other hosted customer relationship management (CRM) vendors aren’t frozen in fear, rivals are bracing themselves for Microsoft’s entry into the space.

Though Microsoft is a latecomer to the on-demand CRM party, the Redmond, Wash.-based software giant is confident that Microsoft Dynamics CRM Live will change the CRM market, particularly in the SMB space. The next major release of Microsoft’s on-premises CRM suite, Microsoft Dynamics CRM, will include on-demand capabilities.

The announcement means that Microsoft will now host its business software under the Live brand. The hosted service will be integrated with Microsoft Windows Live and Office Live services and be managed at Microsoft’s U.S.-based Windows Live data centres beginning in the second quarter of 2007.

According to Frank Falcone, CRM product manager, Microsoft Canada Co., CRM Live will be configurable at the application tier, database level and user interface, without needing written code.

The roles-based CRM tool, like its on-premise cousin, features the Office system integration and look-and-feel. Microsoft already offers on-premises CRM and hosted CRM offered by partners; the hosted product simply provides another deployment option, Falcone said.

“We’re targeting it towards the SMB space right now,” he said.

The hosted CRM market is emerging as a hot one. According to Boston-based research firm AMR Research, revenue from hosted CRM applications grew 105 per cent in the U.S. in 2005.

While detractors note the security, downtime and total cost of ownership concerns, proponents counter that, particularly in the SMB space, hosted options are attractive because they are payable on a month-to-month basis and cost less — upfront at least — than traditional licensed on-premise offerings.

“There is still a fairly large, untapped market for CRM in very small businesses, so Microsoft is wise to target this segment with a hosted product,” said Rob Bois, research director at AMR Research. “At this point, the Microsoft partner network is more oriented towards the small and midsize business segment, so this doesn’t really disintermediate them.”

But Microsoft enters a software as a service market that’s already a fiercely contested one, with Oracle Corp., hosted vendor and SAP AG among the major players.

Antonio Martinez, vice-president, business development, CRM at SAP, said he doesn’t expect the announced Microsoft hosted product to affect SAP’s CRM strategy, particularly in the upper mid-market and top tier enterprise space.

“We push our product in the upper mid-market (and) we don’t see them at all today,” he said. “We expect that to continue when this product launches.”

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