Microsoft Dynamics CRM: Much More Than Meets the Eye - Part 3

Part 1 of this series discussed the current upbeat state of affairs of Microsoft Dynamics CRM, as one of the three best-performing products within the entire Microsoft Corporation of late. In a nutshell, during 2009, the product grew notably and surpassed one million licensed users. Microsoft’s customer relationship management (CRM) offering has become attractive to companies of all sizes, in part due to its multiple deployment options (with bidirectional migration options due to the same code base).

Certainly, much more has to happen before there is truly a common feature set, a common look and feel, and a feasible option to move any company from one mode of deployment to another. The market will thus be keenly looking for referenceable customers from Microsoft who have done this migration even in one direction, let alone as a “round trip.”

The underlying technology developments mentioned in Part 1 have enabled rapid innovation of Microsoft Dynamics CRM in many ways. Part 2 analyzed the following embodiments of rapid innovation: the Microsoft Dynamics CRM Online offeringCRM Product Accelerators, and the so-called xRM (extended relationship management) framework. The xRM approach takes CRM one step further by targeting the management of all imaginable relationships, not just those with customers.

CRM Platform Wars

As analyzed in TEC’s article “War Looms in the On-demand CRM Market (and Beyond)—But Will You Profit from It?” and in my recent blog post on NetSuite, and NetSuite have been attempting similar xRM feats with their respective AppExchange and  SuiteApp application directories, Apex and SuiteScript languages, and and SuiteCloud platforms. Similar to Microsoft Dynamics CRM or xRM, many partners have built applications that go beyond the traditional CRM realm, whereby these custom applications built on manage orders, contracts, proposals, assets, and whatnot.

I must acknowledge here that applications were being built for order a year before Microsoft shipped its Dynamics CRM 4.0 release. Microsoft was neither first to attempt nor leader in fulfillment of the xRM platform vision.

Some notable innovations on's platform include the accounting offering in the cloud (co-owned by UNIT4 and, then an application that tracks investment funds from, and the one that generates "business intensity maps" in the US from ACF Solutions. At the Dreamforce 2009 conference, I saw a demo of a neat application for golf course tee-time reservation via Facebook and the Chester French indie rock band that has its Facebook VIP fan page (with e-commerce capabilities to sell upcoming concert tickets and band merchandize), also built on

The question is then how to compare these xRM platforms. I should note here that the xRM Framework is currently unavailable to Dynamics CRM Online customers. Also, Microsoft is unclear about how xRM integrates with its stated cloud computing strategy and platform, Windows Azure.

The question is then how to compare these xRM platforms. In other words, why should one go for a certain platform--and are they quite comparable in their capabilities? That is a tough question to answer in a blog post, but here is a quick analysis.

In addition to unified communications (UC)/presence information capabilities (although some partner offerings might be giving comparable capability to customers) and the native Microsoft Outlook look and feel (although says that independent research has shown Outlook might be harder to learn and more complex to use than’s UI), Dynamics CRM claims a few advantages over, such as the following:

  • The power of choice, i.e., offering both on-demand and on-premise deployments, with the option to migrate in both directions (see Part 1) (As one caveat, Microsoft claims that the Dynamics CRM Online and on-premise CRM products are on the same code base. However, Dynamics CRM Online has had few service packs during a time period when Dynamics CRM 4.0 has had none, which makes me wonder how can they indeed be the same code line. Perhaps, Microsoft will merge the code bases within the release 5.0?)

  • Microsoft Dynamics CRM is based on more mainstream and familiar technologies (C-SharpVisual Basic [VB], etc.) compared to's (somewhat esoteric) Apex code. (In its defense, claims that code is a Java-family language, with syntax and semantics immediately understandable by any developer familiar with either Java or C#. Conversely, VB is a poster child for Microsoft’s readiness to impose enormous costs on developers as part of Microsoft’s own evolving strategy: the conversion from VB6 to VB.Net reportedly engendered mass protests by developers due to major semantic changes.)

  • Microsoft’s independent software vendor (ISV) partners have to license the platform only once, and they are then free to do whatever they want with it forever, as opposed to’s partners having to pay the vendor some annual royalty (e.g. 15 percent of the solution-generated revenue) ever after; Microsoft also does not charge its partners for leads bestowed upon partners

  • The price for Microsoft Dynamics CRM, with relatively comparable functionality and storage, is at least 30 percent lower compared to, and Microsoft now even has an aggressive promotional offer (see Part 2).

Competitors Do Have Something to Say

On the other hand, companies continue to buy because of’s proven business model, reliability, service record, strength in the market (nearly US$ 1.5 billion in revenues, which dwarfs Microsoft Dynamics CRM), technology roadmap, very large reference sites, etc. questions whether all costs of licensing, maintaining, and operating Dynamics CRM have being fully incorporated in the above comparison, since the ongoing costs of Microsoft solutions can be substantial.

Namely, is any value being accorded to the thrice-yearly upgrades of capabilities that are fully included in the subscription fee, as opposed to the substantial costs (visible and less visible) of purchasing and deploying upgrades to the Microsoft suite? License fees merely begin a stream of costs, notably those of administering “Patch Tuesday” updates (i.e., October 2009 set a record for size and severity) and those of re-writing applications to track the moving target of the Windows desktop environment, as most enterprises simultaneously use more than one version of Windows.

Windows XP will likely co-exist with Windows Vista and Windows 7 for many years to come and developers bear the burden of supporting their code, and of testing and deploying updates, in those multiple environments. Conversely, such costs are essentially subsumed, entirely, in the environment as part of its simple and predictable (albeit possibly steep) subscription fee.

At the Microsoft Dynamics Fall Analyst Event, a week before Dreamforce 2009, Microsoft claimed that once its CRM teams manage to get in the final showdown with, their win rate is 78 in North America. Sure, Microsoft Dynamics admitted there that it can be challenging to get into the final-two showdowns in the first place due to and Oracle's CRM business size, mind share, vertical focus, etc.

One might also infer that Microsoft is only in the final showdown when there is a strong predisposition toward an all-Microsoft solution. Thus the above figure could also be described as Microsoft acknowledging that even among customers whose initial preference is an all-Microsoft environment, and Oracle still convert more than one in five of those opportunities.

On the xRM front, a key difference is that AppExchange, and Apex or SuiteApp, SuiteCloud and SuiteScript are all sub-brands and legitimate engines (a la Microsoft Windows) under the and NetSuite umbrellas, while xRM is a generic concept that Microsoft hopes to establish as a software category in which it will become the leader. In fact, Microsoft has been struggling with articulating exactly what xRM is, or is not. Perhaps this eight-year-old eWEEK article can shed some light and some ideas in that regard?

Some internal friction could ensue as Microsoft Dynamics CRM (and xRM, indirectly) begins to compete internally with other Microsoft products as a development framework (given that it even embraces some open source concepts, as mentioned in Part 2). Even more, there could be some fricition from possibly cannibalizing ISV partners’ solutions via the ongoing delivery of the abovementioned CRM Accelerators.

CRM Accelerators address many functional holes in Microsoft Dynamics CRM. If the Dynamics CRM Online users cannot leverage CRM Accelerators, as it seems to be the case, they therefore must live with the functional gaps.

CRM Accelerators are also not supported by Microsoft, since the users simply get the code downloaded (open source). This might be considered risky by prospects for core CRM processes such as Web-to-lead. It is unclear how CRM Accelerators will be supported through upgrades, a risk factor for any customer looking to upgrade to Dynamics CRM 5.0 next year.

The fact that xRM does not have its own product number (a partner or customer buys a license for the platform components, as described in Part 2) might be one indication that xRM is still in its formulative days. This problem might arise from Microsoft being a product-centered company, trying to lead a service-centered revolution from behind. Conversely, enables partner solutions and is a capability, not a product.

We find that businesses that have fewer information technology (IT) resources and/or that prefer to outsource more of their IT efforts gravitate towards Conversely, those businesses that already have a strong IT infrastructure, and particularly if they are already a "Microsoft Shop," tend to gravitate more towards Microsoft Dynamics CRM (including xRM). Some facetious minds from Microsoft's competitors might call this an example of Stockholm Syndrome at least as much as an indication of actual preference, on the part of organizations that are already heavily invested in Microsoft technologies (and have become somewhat numb to the pain and the costs that result).

Competitors also point out that due to Microsoft’s volume bundling practices for Client Access Licenses (CALs) customers are often licensed for capabilities they don’t really use, making much of the claimed software market “shelfware.” Microsoft’s celebrated number of 1 million CRM users are licensed users, not actual active users, as Microsoft has no really a way of knowing what on-premise licenses are actually in use. Contrast this to, which can see which users are active and how they use the applicationm (or not).

The bottom line is that a prospective customer would probably want to spend quite a bit of time on the front end evaluating this decision to determine what the right path is for their organization. For more information on the CRM market in general and its major players, here is a good article from ZDNet.

In addition, there is always TEC’s CRM Evaluation Center. This might be a good start only, since a main point of the article is that this is no longer about the CRM market, but increasingly about the application platform market.

Keeping Abreast of Trends

In mid 2009 Gartner suggested the following five inexpensive CRM strategies for enterprises:

  1. Creating online communities of customers via emerging social media.

  2. Using analytic tools to find the best business models.

  3. Reviewing your market segmentation using the CRM database.

  4. Improving customer processes.

  5. Conducting an organizational redesign.

These sentiments were pretty much reflected in my recent blog series entitled “These Are the Times of CRM Vindication and Validation.” To that end, Microsoft Dynamics CRM product marketing tesm shared with me its alignment with the strategies outlined above. The following are the five suggested strategies and Microsoft Dynamics CRM’s responses to them:

  1. Create online communities of customers via emerging social media. “We believe that social media and networking indeed present new opportunities and important ones that businesses need to participate in. As demonstrated with the new Social Networking Accelerator for Microsoft Dynamics CRM, businesses can now discover important conversations, identify influential people, and participate in the conversation to drive customer satisfaction and sales/service effectiveness. The significance of Microsoft’s approach is that social networking activity can be incorporated directly within Microsoft Dynamics CRM, centralized for all CRM users to see and measure, and perhaps most importantly, important conversations can trigger existing service/sales workflows (e.g. , create a new case based on the social networking conversation) with a single click.”

  2. Use analytic tools to find best business models. ”Analytics are critical to gaining insight into what business processes and models must change to drive better effectiveness. Every one of the CRM strategies depicted in our white paper entitled “Customer Relationship Management: The Winning Strategy in a Challenging Economy” rely on some level of analytic insight to drive the appropriate change and behavior. Incidentally, a robust set of analytic capabilities are included with Microsoft Dynamics CRM out-of-the-box.”

  3. Reviewing your market segmentation using the CRM database. “In a challenging economic environment, it’s particularly important to have a more granular understanding of one’s customers to ensure customer retention, and to drive the kind (and associated cost) of different kinds of treatment that a business is willing to invest in customers that provide different levels of value.”

  4. Improve customer processes. “This is consistent with Gartner’s 2nd and 3rd points above. Once analytic tools are applied to a customer database, it’s easier to gain a deeper understanding of what kinds of customers a business has, where processes are succeeding (and failing), and where it could focus its resources and investment.  In this economic environment, the “simplify your service experience” and “right-size your service costs” strategies are applicable to just about every business. These strategies are something that speaks to process optimization once analytics are applied to the customer base and customer processes.”

  5. Conduct an organizational redesign. “While organizational redesign is an option for every business, it is up to the business to understand their customers and processes at a granular level to make these kinds of decisions. Again, analytics such as those included out-of-the-box with Microsoft Dynamics CRM are a critical component to gaining that granular insight so tha business decisions like these can be made.”

Dear readers, what are your views and comments in this regard? Do you agree with our assertions of the product’s traditional good traits and flaws? If you are existing users of Microsoft Dynamics CRM or its xRM derivatives, what have been your experiences with these products and what is your take on the product’s future?
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