Microsoft CRM Online Hunts Salesforce.com

Microsoft CRM Online Hunts Salesforce.com

Summary: The official GA release of Microsoft's CRM Online offering is next week, and with it comes a new chapter in the life of Salesforce.com.

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The official GA release of Microsoft's CRM Online offering is next week, and with it comes a new chapter in the life of Salesforce.com. To date Salesforce.com has lacked a major competitor that could be seen as a worthy opponent in terms of overall size, price, functionality, and marketing chops. Oracle has the marketing chops, and Siebel On Demand the functionality, but Oracle isn't really going to challenge Salesforce.com on price. Zoho, which just launched a CRM on-demand offering, and various other permutations of both on demand and open source CRM products are able to challenge Salesforce.com on price, and maybe functionality, but Marc Benioff can frankly out-market any of these companies before he gets out of bed in the morning.

Now there's Microsoft Dynamics CRM Online. And the challenges for Salesforce.com can now begin. The goals of CRM Online are to match or beat Salesforce.com in feature/functionality, absolutely beat it in price, and with the combined power of the Microsoft brand and the ubiquitousness of the Outlook user base, seriously challenge Benioff's hype machine on the marketing side. And they definitely have a chance at succeeding in all three.

I'm not going to parse the feature/functionality battle between the two at the individual function level here, but I can offer three main reasons why I think CRM Online needs to be taken seriously as an alternative to Salesforce.com. The first is Microsoft's Outlook UI, known (though not always loved) by hundreds of millions of users. Love it or not, that user experience makes training for CRM Online a non-issue. Salesforce.com is pretty easy to use as well, but using Outlook is, for most desktop users, already intuitive.

Functional advantage #2 for Microsoft is the ability to shift between on-premise and on-demand, and mix and match the two. On-premise support is about customer choice, and lots of customers I know don't want to be locked into on-demand any more than they want to be locked into any other deployment model. There are good business cases for on-demand deployment, and equally good ones for on-premise, and Microsoft CRM wants to support them both, something Salesforce.com simply cannot match.

Functional advantage #3 for Microsoft comes from Office integration. Right now this is an on-premise Office integration to CRM Online, which means that if you want to push sales data into an Excel spreadsheet, that spreadsheet can only reside locally. This is not equivalent to the on-demand integration that Salesforce.com is promising with Google's Apps, but, as I don't believe Google Apps are really ready for prime-time in the enterprise, I think the Office integration direct from the Outlook UI is a better functional advantage than either Salesforce.com's Google Apps support or its own native Office support.

That's the functional side. On the price side, CRM Online wants to seriously undercut Saleforce.com pricing, and is doing so by charging significantly less than Salesforce.com for both basic and premium functionality. At the top end, Microsoft wants $59 per user per month for functionality that would cost a Salesforce.com several hundred dollars per month. (Especially when you include the 20 gigs of storage that Microsoft offers for free, for which users of Salesforce.com would pay dearly for. For a comparison of Salesforce.com premium pricing, look at Ephraim Schwartz's column on the subject.) I think it's going to be largely impossible for Salesforce.com to institute any across-the-board pricing changes to match Microsoft, without watching its stock price collapse. So, on the pricing front, I think Microsoft has Salesforce.com beat cold.

Now for the hype side. That will be hard, as Benioff has proven time and time again. Deals like the Google Apps agreement play well, even if substantively they are a lacking in demonstrable market impact. Regardless, Benioff keeps pulling rabbits like Google out of his hat on a regular basis. But Microsoft has it's much-vaunted market clout, and Brad Wilson, the GM in charge of CRM at Microsoft, is no wall flower either. And, once Microsoft can get its own platform-as-a-service, Office in the cloud story aligned with CRM Online, there's going to be a lot to hype that, under the covers, will be more than just a fortuitous rabbit popping up in a cloud of smoke. A lot more.

A final point. The competition between Microsoft and Salesforce.com won't be head to head at all levels, at least initially. Microsoft CRM Online is not being targeted today at the top tier customer base that Salesforce.com has been after, the challenge to Salesforce.com will come at Salesforce.com's core mid-market, though Microsoft's large SI partners, like EDS, are expected to bring CRM Online to the top tier customer base by hosting it in EDS's data centers. This exclusive focus on the mid-market will likely change as the market shifts its attention to the new CRM on-demand kid on the block.

I've always contended that CRM on demand in general, with all due respect to all its adherents, is more of a commodity play than a strategic value play, particularly for the vast majority of deployments, which are mostly standalone and largely serving a contact management, sales force automation need. In this part of the market, the largest segment by far, Microsoft can and will excel, pun intended, against a Salesforce.com whose focus on a strategic marketing, sales, and pricing model makes it look more and more like it's swimming against an increasingly strong tide. At the higher end of the strategic scale, the future is a little more cloudy, especially as I'm not convinced that Salesforce.com or Microsoft can really claim they know how on-demand CRM will work for these customers.

The hunt for Salesforce.com at Microsoft is on, which of the two contenders returns victorious will be one of the more interesting stories of 2008, and beyond.

Topics: Enterprise Software, Microsoft, Software

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5 comments
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  • Bye bye Salesforce.

    I don't really think all that many will miss you. The claims of it's leader of the end of software and many other over confident and arrogant remarks have not set well with IT people I know. <br><br>
    What is his name though...i almost have it...Mark?....Mark....ummmm.....jerk-off? Something like that. ;)
    xuniL_z
  • RE: Microsoft CRM Online Hunts Salesforce.com

    Josh,

    Where do you get your information from?

    "Oracle has the marketing chops, and Siebel On Demand the functionality, but Oracle isn???t really going to challenge Salesforce.com on price."

    Oracle's Siebel CRM OnDemand is only $70 PUPM and includes a Data Warehouse, True Historical/Real Time/Predictive Analytics, the ability to use Pivot Tables and a guaranteed uptime (SLA).

    You can't get these features from SFDC at any price.
    CRMOD
  • RE: Microsoft CRM Online Hunts Salesforce.com

    Microsoft is only doing CRM on-demand as a stepping stone to convert customers into the more lucrative on-premise solutions. I don't think people will fall for Microsoft's failed promises anymore. There is no way Microsoft will win this battle. They simply don't have the functionality and ease of use.
    YO ME
    • Wrong

      What makes you think the on-premises version is more lucrative for Microsoft? It would seem to me that getting paid every month for every user would be provide a pretty nice revenue stream. Microsoft's cost of running an application like CRM Online is going to be very low...they buy hardware in huge quantities, manage the software in a highly automated fashion. The customer buying CRM as a hosted service will probably have overall lower TCO b/c of the lower management costs, no need to buy hardware etc. But Microsoft will probably make as much if not more.
      marksashton
  • RE: Microsoft CRM Online Hunts Salesforce.com

    At my company, I use Salesforce.com for my front office (Sales & Service teams), and Microsoft Dynamics GP (formerly Great Plains for my backoffice).

    The difference of the ease of use, ability to customize and configure, and maintain both applications is the difference between night and day.

    When the Microsoft CRM Salesman comes calling, I'm ready. Show me first how to make Microsoft Dynamics GP as easy to use as SFDC, and then I'll consider adopting Microsoft CRM Online.

    If you give me a product that saves $$$, but gives me more headaches -- like the daily headaches I get from wrestling with "Great Pains" -- I'm flat out not interested.
    JPSeabury