Microsoft enters customer-service realm

Microsoft will test its business acumen by the end of this year with new software for automating customer-service functions.

On Tuesday Microsoft is expected to detail plans for Microsoft Customer Relationship Management, or CRM, a new software package due in the fourth quarter of 2002, according to executives.

The software will represent Microsoft's entry into a new market, which could potentially antagonize relationships it has fostered with business software makers such as Onyx Software and Siebel Systems.

For Microsoft, the CRM software is significant in that it represents one of the first of several server-based products to be built by the company using its .Net software framework, an initiative the company has championed as a means of writing programs for Internet computing, or Web services.

Microsoft executives insist they are targeting an underserved market and do not intend to compete with partners. The company said the new CRM technology will not compete with an agreement inherited from Microsoft's Great Plains purchase to resell technology from Siebel. That pact was intended to serve high-end customers with thousands of employees.

Nevertheless, the move is sure to raise the ire of partners such as Onyx and Pivotal, and larger concerns such as Siebel, which has dominated the lucrative niche and built a multibillion-dollar business as a result.

"Microsoft has looked at the size of the CRM market, looked at the (customer) account control that CRM offers" and realized that the animosity of some of its software partners was "worth risking," said Dwight Davis, software analyst with technology consultants Summit Strategies.

Davis said the difference between Microsoft's initial CRM package for small businesses and those of its larger competitors will likely be "fleeting."

Microsoft executives said the company's CRM package is tailored for businesses with 25 to several hundred employees and does not provide the complexity or customization that high-end systems from Siebel, for example, entail.

"There's a tremendous opportunity in this market," said David Thatcher, general manager of Microsoft CRM. "It's not a very saturated market."

Microsoft CRM will enter testing in late spring, and will ship by year's end, according to the company. No pricing has been announced. The new software will be sold as a standalone product as well as integrated into Great Plains Dynamics, Solomon and eEnterprise software packages.

Microsoft plans to sell and install the software through Great Plains' reselling partner channel, and support will be provided by partners and Great Plains' customer support personnel. The software will be available standalone, or on a hosted basis through the company's partners.

Microsoft believes that small and medium-sized businesses are ready for a collection of CRM software but not the type of technology that takes several consultants and a lot of time to implement. "CRM is no longer an enterprise-only product," Thatcher said.

The CRM software can be viewed by a computer user through a Web browser or within Microsoft's e-mail software Outlook, according to the company.

At the close of its acquisition of Great Plains last year, Microsoft culled a Great Plains team and added a group of Microsoft Office developers and coders from Microsoft's bCentral small-business Web site to tackle the CRM product, Thatcher said. That team has been using the recently released Visual Studio.Net development tools from Microsoft for about a year, he said.

Gartner analyst Joe Outlaw says CRM vendors with full-featured products...don't have much to fear from Microsoft in this area. see commentary

Web services are a method for building software that lets companies with different computing systems interact and conduct transactions. In the next few years, analysts expect Web services to gain popularity as a more efficient way of building software. Microsoft has bet big on this trend, calling it at one point "more significant than the development of the (Web) browser."

The .Net strategy spans Microsoft's entire product family, from the Windows operating system to its online properties such as MSN for consumers and bCentral for small businesses. It includes the .Net e-business software infrastructure, which contains the Exchange e-mail software and SQL Server database for storing and collecting corporate and Web site data.

Microsoft plans to launch either later this year or early next year a set of Internet services called .Net My Services--aimed at individuals--that could help the company transition from reliance on revenue based on one-time sales of software to recurring revenue through subscription-based services.

Earlier this month, Microsoft released its Visual Studio.Net software development tools for building Web services. The tools include the .Net Framework, the software fabric that automates many development tasks and helps software run reliably and securely across multiple servers and computers.

News.com's Wylie Wong contributed to this report.