Microsoft updates its CRM offering

Microsoft Corp. this week shipped the long-awaited update to its customer relationship management (CRM) software.

Microsoft Dynamics CRM 3.0 marks the first key enhancement to the CRM tool the Redmond, Wash.-based vendor initially launched three years ago.

The new “Dynamic” tag to the software introduces an emerging product line that comprises two business suites, ERP and CRM, said Garth Dean, director of Microsoft business solutions for Microsoft Canada in Mississauga, Ont.

The last CRM offering from Microsoft was CRM Version 1.2. Microsoft originally announced plans to release version 2.0 this past spring. In the end the company determined — based on input from beta testers — to jump straight to 3.0, Dean said.

In the latest version, the basic database is only able to operate within a single-tenant IT environment. Microsoft is working towards operating within a multi-tenant IT environment – a feature that’s key to Microsoft’s hopes of selling CRM 3.0 to “software as a service” providers.

A multi-tenant environment means there exists a single instance of a database that’s designed to scale to thousands of users, each having his or her own virtual, secure environment.

The new tool also is available as both an on-premise and hosted deployment model. In July, the company had revealed that the hosted CRM 3.0 version would be sold using a subscription-based pricing format, which potentially reduces the risks in deploying CRM, according to Microsoft. Subscription-based pricing, according to Dean, will be through a partner network that will offer hosted applications based on Microsoft CRM.

The software targets the SMB, midsize and enterprise-level users, Dean said, in that Version 3.0 features a revamped workflow engine and adds a marketing module to the existing sales force automation and service components of the suite, which is potentially ideal for larger organizations.

Industry analyst Liz Herbert of Forrester Research Inc. in Cambridge, Mass. said Microsoft’s claim that integration with Outlook will shorten learning curves and make navigation flows easier is consistent with customer references contacted by Forrester.

Tourism Whistler is currently using CRM 3.0 as it gears up for the 2010 Olympic and Paralympic Winter Games. Breton Murphy, manager, communication and media relations, said the Whistler, B.C.-based organization was using version 1.2 and notes that the contact management functionality has been improved in the latest version.

CRM 3.0 also features tighter integration with Microsoft Outlook and the Office System software suite, Dean said. For example, documents and contacts in the Office and Outlook applications can automatically flow into the CRM suite if marked for inclusion. Users can also access the system through a browser-based client or a mobile device, Microsoft said.

The firm has a staff of around 70 employees interacting with more than 7,000 members as well as global partners, clients and visitors. “The biggest thing we noticed is an increase in flexibility,” Murphy said. In the previous version for example, the contact management functionality was limited in what the firm could do with it, he added.

Microsoft CRM 3.0 will ship first in English, with Dutch, French, German and Russian versions joining the lineup January 1. By mid-2006, Microsoft expects to have versions available in 22 languages, including several such as Japanese and Simplified Chinese in which it did not offer previous versions of its CRM software.

Microsoft is tweaking its packaging for this release, offering two versions, Small Business Edition and Professional Edition. Each features full sales, marketing and service functionality, according to Brad Wilson, Microsoft’s CRM general manager. The Small Business Edition is designed to run on Microsoft’s Windows Small Business Server, which has a 75-user cap, and offers tools for migrating from Microsoft’s Business Contact Manager software.

Indeed, it appears that as software vendors are jockeying for position in a crowded midmarket enterprise applications landscape, end-users reap the benefits in rapid product enhancements.

A half-dozen ERP (enterprise resource planning) and CRM (customer relationship management) software makers are in the midst of major software releases right now, bringing deeper integration options and added customization features to their applications.

For example, hosted CRM rival NetSuite recently launched an update (version 10.6 ) to its hosted sales, ERP and e-commerce applications suite. NetSuite chief executive officer Zach Nelson said that this latest CRM offering from Micrsoft wouldn’t impact Netsuite’s business.

Outlook isn’t perhaps the best user interface for these applications, Nelson said. “People are looking for Web-based applications that look like the Internet, behave like the Internet. And while Outlook is prevalent on the desktop, that’s not going to be the case five years from now.”

The big hurdle for Microsoft, though, is that its software isn’t designed with the multi-tenant architecture that allows providers to benefit from economies of scalewith hosted applications. Each customer organization requires its own server and dedicated database. Until it offers multi-tenancy, Microsoft won’t be a serious player in the on-demand applications market, Yankee Group Inc. analyst Sheryl Kingstone said.

She also thinks customers would like to see Microsoft offer hosted, subscription-priced applications directly, not only through its partner network. “There’s absolutely a demand for that,” Kingstone said.

Microsoft has sent a muddled message about how it wants to approach the growing market for managed, Web-based applications, popularized for consumers by Google Inc. and for businesses by But the company’s lagging pace in the hosted CRM market has left it playing catch-up behind smaller, nimbler vendors, she added.

In late 2006, the follow-on to Version 3.0, code-named Titan, will be available. Titan will further enhance the suite’s multi-tenant architecture by making the Web server multi-tenant capable. Titan will also see a multilingual user interface available on a single server to allow Microsoft partners to get into the international market for CRM.

As for pricing, an on-premises solution is priced between US$ 622 and $880 per user and $1,244 and $1,761 per server for the professional edition. A small business edition is priced between $440 and $499 per user and between $528 and $599 per server.

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