Microsoft previews next-generation CRM

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maintains that all applications will be delivered in the on-demand model someday.

"The traditional hosted model says, 'You will rent from me forever,' and I think that people want some more flexibility than that," Wilson said. "And the notion that this is going to be the only model on the market doesn't seem to make sense to us, based on what we hear from customers. What companies want is flexibility to choose as they go, based on specific needs, and that's what we want to offer them."

Though Microsoft's initial CRM package was designed specifically for small businesses that had never had such applications, Wilson said Microsoft is increasingly dealing with larger customers. The company currently counts more than 5,000 CRM installations, and a growing number of those deals are with midmarket companies and even divisions of large companies, according to the executive.

Though Microsoft isn't aiming specifically for the enterprise sector, where mammoth vendors such as Siebel Systems, SAP and Oracle dominate the market, Wilson said he believes that the expanded CRM package will appeal more to larger companies than its predecessor. In some cases, he said, the applications already have been adopted by customers with Siebel and SAP software in place in the name of getting up and running faster than they might have with those companies' products.

"Everybody in the midmarket segment will need to take a hard look at (CRM 3.0) because this is going to be a really attractive product to those customers," Wilson said. "This will change the way that people compete, because the package has all the desired benefits of the systems on the market today, along with Microsoft's client ecosystem behind it."

The wait is over
The people most attentively awaiting the arrival of the new Microsoft CRM package most likely are the company's channel partners, who will continue to be the most popular source for the tools, according to Wilson.

Ben Holtz, chief executive of Watertown, Mass.-based Green Beacon Solutions is one of the partners anxiously awaiting the arrival of the 3.0 release. He said customer interest in Microsoft CRM has quieted down significantly since the company introduced its first set of applications, despite the fact that he feels those tools have performed well at the two customers his company currently supports on the software. Holtz believes the new release will touch off a second wave of interest in the CRM applications.

"Microsoft CRM has been a little bit frustrating for us. We really thought that we'd be doing more business around it today, but there hasn't been as much interest as we originally expected," Holtz said. "We think they had a solid product to begin with, but hopefully with everything we're hearing about the next version, there will be a great opportunity to get people in to look at it and close more deals."

Industry watchers agreed that the retrenched version of Microsoft CRM should help the company increase its CRM market share, which analysts at AMR Research reported as being roughly 2 percent in 2004. Laurie McCabe, analyst with AMI-Partners said Microsoft is following a calculated plan whereby it got its name into buyers' heads in the CRM market first and then worked to build an applications set that can better compete with other products.

She said the close ties to Microsoft's Office software and the similarity of the CRM system's user interface to Outlook are details that will likely appeal to many potential buyers.

"With CRM 1.0 Microsoft disrupted the CRM market to a certain extent, and now they're trying to bring something much stronger to the table, and that's smart," said McCabe. "The ties to Office are a huge advantage. If you look at what SAP is doing to integrate with Office in the enterprise market with its Mendocino partnership with Microsoft, you get an idea of why this could be so compelling to smaller companies."

Other industry experts observed that the hosted delivery option could be another major catalyst for increasing interest in Microsoft CRM. Liz Herbert, analyst with Forrester Research, said Microsoft should be able to capitalize on increasing demand for hosted applications, especially among small and midsize companies.

"There's a lot of interest in software delivered as services right now. We hear from more companies all the time that are looking at on-demand as their preferred model for software delivery," Herbert said. "This release represents a major improvement. It's not like where we see rapid updates in the hosted space that offer limited improvements. This release will be a difference maker for Microsoft."

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Workopia, Inc.
www.workopia.com