On February 26, Microsoft Corporation (NASDAQ: MSFT) announced it would deliver Microsoft Customer Relationship Management (MS CRM), the first Microsoft business solution built on its .NET platform later this year, possibly as early as October. The move is Microsoft's latest aim at the business application market for small enterprises, a market it ultimately plans to dominate. Accessible from Microsoft Outlook and the Web, MS CRM is devised to enable small and medium enterprises (SMEs) to build more profitable customer relationships through increased sales effectiveness and consistent customer service. Microsoft touts that the product is designed for rapid deployment, ease of use, and integration with Microsoft Office and Microsoft Great Plains' back-office solutions.
Microsoft Customer Relationship Management will be available as a standalone product as well as an integrated solution to Microsoft Great Plains Dynamics, Solomon and eEnterprise. Its expected availability in North America is in the fourth quarter of 2002, while the availability outside of North America will be phased and is expected to begin in the first quarter of 2003. It will be sold and implemented through Microsoft Great Plains' reselling partner channel, and partners and Microsoft Great Plains' award-winning customer support team will provide support. The solution will be available on-premise or as a hosted solution through select partners.
MS CRM complements (and possibly overlaps with) a plethora of Microsoft's other CRM offerings for small and medium-sized businesses, including bCentral Customer Manager and DealerPoint, Microsoft iCommunicate, Microsoft Great Plains eEnterprise Field Service, Microsoft Great Plains Solomon Field Service and Great Plains Siebel Front Office.
Having stepped into the enterprise applications market through its Great Plains division, it was merely a matter of time before Microsoft would succumb to the temptation to cultivate the fertile small enterprises ground, where CRM penetration is less than 10%. On the other hand, Microsoft has long sowed its seeds there, evidenced by 90 million Outlook users. Also, since Microsoft has long been entrenched in the small business market segment with its other desktop and office networking applications, one should expect firms with approximately 25 to 75 users to readily adopt Microsoft's simple, Outlook-centric CRM software.
The product's functionality includes basic contact management as part of Sales Force Automation (SFA), simple e-mail based marketing tools, and call management with a customer service knowledge base. These features are what the targeted customers need at this stage. An affordable, no-frills out-of-the-box application with minimal implementation risk and innate integration to MS Outlook and MS Exchange will likely strike a chord with this market segment. Also important to note is that this is the first Microsoft .NET-based product. It gives legitimacy to the platform and to the concept of Web services, which many still consider to be hype and a strategy in flux. This may prompt more wholehearted acceptance of .NET by other smaller Microsoft-centric business application vendors, well beyond a handful of early adopters such as Navision, Made2Manage, and Epicor Software.
Although Microsoft will try to downplay (and possibly even curb) its desire to compete in the higher-end of the enterprise market for the time being, major players in the market cannot rest completely at ease. The fact remains that the product will not appeal to companies that need more complex CRM capabilities or must manage customer relationships through diverse lines of business (LOBs). These customers would most likely require extensive customization, for example building workflow managed processes to align sales teams by territory, product line or campaign.
Moreover, the enterprises that have integration needs outside of the Microsoft environment, have complex sales and call-center service business practices, or need advanced CRM functions such as product configuration, content management, personalization and relationship optimization, will have to look at more sophisticated offerings. Microsoft has not garnered sufficient experience in the enterprise level business application market, and has not developed a strong mind-share among the C-level executives (decision makers) at the larger corporations.
Nonetheless, the chances that the giant will remain content for long with the current capabilities are very slim. With the base product and a strong development and marketing team (150 core CRM developers and 1,000 sales & marketing personnel) and Microsoft Great Plains' extensive sales channel in place (2000 partners, whereby 700 trained CRM partners), Microsoft plans to incrementally add product catalogs, sales quotes, pricing, marketing encyclopedia, pipeline management, forecasting, sales contracts, and CTI (computer telephone integration) functionality. Also, future releases will feature a customer portal to provide access to the knowledge base, Frequently Asked Questions (FAQ), visibility into open customer call inquiries, and a storefront that provides order visibility through integration with Great Plains' products.
It does not take a genius to realize that over time and with these features in place, the MS CRM product might appeal to the more sophisticated prospects as well. MS CRM should offer better Total Cost of Ownership (TCO) due to the native integration to the Microsoft technology pile and the rest of the Great Plains product portfolio, all founded on the .NET framework. Consequently, the Siebel/Great Plains partnership may feel some strain although the alliance has been successful, evidenced by over 500 joint customers so far, out of over 1,100 Microsoft Great Plains' CRM customers in total. The reality is that both products will be competing in the same channel partners network sooner or later. Indeed, some Microsoft Great Plains' peers that also have partnerships with Siebel claim that their customers often prefer their native simplistic CRM functionality rather than complex and often overwhelming Siebel functionality.
Furthermore, such mid-market CRM vendors as Onyx, Pivotal, Kana, and Interact Commerce might start to find difficulties in closing smaller deals soon. Many more will be affected in the long run, as new functionality and product maturity make Microsoft more amenable to the higher-end of the market segment opportunities. As the end of the year product release timeframe may not seem to be much of an issue (particularly given the current sluggish economy and the 'wait-and-see' buying approach), many companies might postpone their CRM investment until they see what Microsoft can deliver in that regard. This is likely to immediately affect the prominent players in the lower-end of the market, including FrontRange (the GoldMine product), Epicor Software (the Clientele product), Interact Commerce (the ACT and SalesLogix products), and some of the existing MS Outlook-based CRM providers like Oncontact Software, Multiactive Software, and WorldTrak, as well as hosted providers Salesforce.com or UpShot.
Small and medium size businesses using Microsoft Great Plains back office applications and smaller organizations using Microsoft desktop and office applications that have simple CRM product needs (simple sales & marketing, and basic customer service activities) should react positively to this news. They should evaluate the above CRM functional enhancements as a way to add value to their existing applications although bearing in mind that other vendors currently offer mature products. These companies should consider adding the announced functionality to their requirements list, as to secure value in terms of both cost savings and increased efficiency. Approach Microsoft to clarify for you the subtle differences (and likely functional overlaps) between MS CRM and other small business CRM products the company offers.
However, due to the likely product immaturity small businesses with less than 100 employees should consider other products until 2003 in North America and in 1Q04 in the rest of the world. Also, bear in mind that the first release of MS CRM will not provide tight call-center integration or permit significant application customization, and it should not be short-listed by larger or more complex enterprises, with multiple-platform and strong scalability requirements.