Microsoft Launches On-Demand CRM Software into a Crowded Market

On April 22, Microsoft announced the “general availability” of its Microsoft Dynamics CRM Online product. The new service is an on-demand customer relationship management software offering hosted and managed by Microsoft in the so-called “cloud.”

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According to Microsoft, the new Internet-based subscription service “delivers a full suite of marketing, sales and service capabilities through a Web browser or directly into Microsoft Office and Outlook.”

Business users’ familiarity with Office products such as Excel spreadsheets was a big sell for the 500 businesses that participated in the early access program during the past six months, according to Bill Patterson, director of product management for Dynamics CRM Online.

Pricing for the subscription-based Professional edition is $44 per user per month. The Professional Plus edition, which offers more storage, offline data synchronization and more software customization options, costs $59 per user per month.

While IT executives are studying how and when to implement cloud computing applications, Microsoft has been investing billions in data center operations to be able to deliver software as a service (Microsoft calls it program software plus services). (See Microsoft Buys into the Cloud.) Square in its sights is market leader Salesforce.com and its on-demand CRM applications. (Microsoft says that according to publicly available information, its $44 per user per month undercuts Salesforce.com’s $65 per user per month for its Professional Edition.)

In addition, Microsoft is wrapping its Dynamics CRM Online offering around giving its customers “choice,” which is a recurring theme heard from Microsoft executives. The choice is that its customers can use its traditional on-premise software (for example its Dynamics 4.0 CRM software package) as well as its newer on-demand offerings (such as CRM Online). Patterson says that “it’s the same technical code base” in the on-premise and on-demand CRM applications and customers can have both offline and online capabilities.

“The real testament to this release has been about building a technical solution that scales from small box up to the data center,” Patterson says. So far, Patterson says that the average Dynamics CRM Online deployment has about 15 seats. And for many of these companies it’s their first CRM system, he notes.

Not only is Microsoft trying to assert itself in Salesforce.com’s backyard, but it’s also among a number of big software vendors rushing in to grab marketshare in the midmarket segment. Among others competing there are SAP and Oracle. (See for example, SAP Goes with Gusto for Small and Medium-Sized Business Customers.) “Microsoft definitely has aims of going higher in the enterprise market,” says Warren Wilson, research director at Ovum. “So they’re bound to clash [with SAP and Oracle] in the midmarket.”

One rather large leg up for Microsoft as it expands its Dynamics CRM and ERP lines is its Windows and Office franchises. “Although Microsoft doesn’t have the track record of either SAP or Oracle in terms of supporting very industry-specific business processes,it has the Windows and Office monopolies which is a huge, huge advantage,” Wilson says.

In addition, all CRM and ERP vendors are trying to make these applications easier to use, especially as they target the mid-market. And that could be a huge advantage for Microsoft. “What better way to do that then let people remain in Outloook and use that interface to access the [CRM or ERP] functionality,” Wilson says. “Microsoft knows Outlook better than anyone else and has a tremendous advantage to leverage that.”