Given that the on-demand customer relationship management (CRM) market is still evolving and nascent, Microsoft's recently launched Dynamics CRM 2011 Online offering is expected to face competition from existing players such as Salesforce.com and Oracle.
Phil Hassey, founder of research firm CapioIT, said the market for on-demand CRM is "far from being saturated and mature" and there is "definitely an opportunity" for vendors such as Microsoft to compete strongly in this space.
The analyst said in an e-mail that while Redmond's CRM product is "slightly lagging in key areas" compared with existing offerings from rivals such as Salesforce.com and Oracle, its differentiator is in the integration with Microsoft's other products and deployment options.
Hassey said: "For loyal Microsoft customers, the use of Microsoft software rather than Salesforce.com, for example, is a significant step for them. The one significant differentiation for Microsoft, compared with Salesforce.com, is the opportunity for an on-premise [deployment]."
Sam Higgins, research director at ICT research and advisory firm Longhaus, agreed.
In an e-mail interview, he noted that Dynamics CRM's integration with Office 365, formerly branded as Business Productivity Online Suite (BPOS), will continue to ensure Microsoft a place in customers' vendor selection process.
"This latest release [of Dynamics CRM] from Microsoft will keep organizations that want to adopt a lean vendor approach to solutions very happy," said Higgins.
Dynamics CRM 2011 Online was launched on Jan. 18 but only the SaaS product hosted by Microsoft was made available. The on-premise and third-party hosted versions will only be commercially available on Feb. 28, according to Microsoft, which said the time gap was needed to conduct extra tests to ensure the new offerings will work outside of the company's data centers.
The option to deploy the CRM product on-premise, on-demand or via third-party hosting sites will be a key advantage for the software vendor, said Adrian Johnston, Microsoft's Dynamics Asia general manager.
He told ZDNet Asia in a phone interview that while Salesforce.com offers its CRM suite only as a third-party hosted option, Microsoft is able to offer its product on a hosted platform as well as through on-premise, internal deployments and software-as-a-service (SaaS).
Elaborating on rival Oracle's Siebel CRM offering, which mirrors Redmond's deployment options, Johnston noted that the competing product runs on different code bases when deployed on-premise and over a cloud, putting Oracle in a disadvantage.
Thus, customers that want to pilot the software on-premise or through SaaS within a specific market, before deploying it across multiple markets, for example, cannot do so "easily" using Oracle's products compared to Microsoft's, he said.
Oracle was unable to reply to ZDNet Asia's questions at time of post.
Higgins said price will also be a key sway factor, pointing to Microsoft's "aggressive approach to cloud pricing". The analyst noted that customers that may have found the pricing of both Salesforce.com and Oracle to be out of their reach, Redmond's offering will be "highly attractive".
As part of Dynamics CRM 2011 Online's initial launch, Microsoft said it cut the software price-tag from US$44 to US34 per user per month. Last December, it also announced that companies--with 15 to 250 employees--migrating from rival platforms will be given US$200 for every user involved in the move.
"We expect that not only will this increase the adoption of Dynamics CRM but, in some cases, we'll see migration away from Salesforce.com," Higgins noted. He added that some customers see the SaaS vendor as "over-complicating" its business model by moving from a CRM vendor to a platform-as-a-service operator.
Quizzed on this, Peter Coffee, vice president and head of platform research at Salesforce.com, disagreed. He told ZDNet Asia in an e-mail that its customers "love the power" they get from the Force.com platform, which is at the heart of all its applications.
The ease-of-use on the platform to tailor "rich applications" according to customers' needs, mostly with "clicks rather than code", also brings in more employees onto the platform and encourages company-wide collaboration, Coffee added. "The proven, trusted Force.com platform lets 'citizen developers' in business units create and deploy collaborative custom apps quickly without buying hardware or installing software. Our PaaS offering is the ultimate Salesforce CRM feature."
He also dismissed Microsoft's first foray into cloud-based CRM, saying that it is a "snapshot of history".
"Microsoft still bases its CRM on PCs and laptops, with the Outlook client model that's older than the Web. Microsoft is giving its customers a snapshot of history, not a real-time app for today's social, mobile and open world," he said.