news analysis Microsoft will have an impact on the customer relationship
management market. But how important will its role be?
newly-discovered desire to become the CRM software supplier of choice for SMEs
has, let’s face it, been greeted with more than a hint of scepticism.
OK, so Microsoft practically
owns the desktop OS, word processing and email markets but that doesn’t mean
it’s any good at CRM applications, right? Well, guess what. Even though it’s
undoubtedly still finding its feet, Microsoft is soon going to be one of the
biggest CRM players there is.
“We think Microsoft will become a very important player in
the CRM market,” says Jim Davies, research analyst at Gartner. “We estimate it
will be one of the top five providers within the next two years.”
The opportunity for Microsoft in the relatively untapped SME
market speaks for itself. The Redmond software giant has about 30,000 existing
Great Plains customers and about the same number of firms using Navision, yet
around 80 per cent of these companies don’t have a full CRM solution, providing
a great cross-sell opportunity. The biggest problem for Microsoft is in taking
advantage of it.
“Microsoft has got to demonstrate that it has mid-market
reach and service delivery capabilities,” says Nick Hewson, managing director of
CRM consultancy Hewson Consulting. “Its biggest challenge is to deliver this
channel, otherwise it’s going to go nowhere, because it only has partners in the
technical sense, not the business sense.”
Microsoft is aware that its channel strategy needs to mature
further. Because it plans to give SMEs access through their usual Office
software supplier, it has taken steps to complement its channel’s knowledge of
technical concerns with business CRM issues.
“We’ve been working with hundreds of resellers who are
interested, keen and are taking their Microsoft CRM exams,” says Michala
Alexander, Microsoft’s CRM product manager. She plans a three-pronged approach
to market, pulling in existing Microsoft-based computer, business solutions and
In fact, it’s in the infrastructure department that
Microsoft’s CRM plans have been seen as yet another way to lock-in cash-strapped
SMEs. Alexander admits that its CRM will only work on a Microsoft infrastructure
but says there are ways to maximise the investment for those that don’t already
“It will work on our Small Business Server 2003, which is a
lot cheaper than pulling-in a full Microsoft infrastructure,” she advocates,
explaining that partnerships with Avaya and Genesys, for example, could offer
further choice in functionality.
Nevertheless SMEs, without the appropriate infrastructure,
are going to be forced to buy it if they would like the familiarity of Microsoft
software in their CRM operation. This could involve purchasing Microsoft
Exchange and Active Directory Servers, as well as some Service Packs, to plug
“Most SMEs are already using a Microsoft infrastructure but
not all of them will be aware of the heavy (investment) requirements for CRM,”
says Gartner’s Davies.
The alternative is to adopt the hosted CRM model, which could
minimise this potential outlay. During January, Aspective became the first U.K.
ASP to offer Microsoft CRM under its SmartCRM service. Others will follow.
Microsoft sees the hosted
model as an opportunity for SMEs to ‘try-before-they-buy', and expects an
increase in its popularity. It has been implementing its CRM solution in the U.S.
for some months and so experience gained there could help European firms that
wish to keep it in-house.
But SMEs will question whether this first version of the
software is fundamentally worth their money, however it is being supplied.
“Reports from end users indicate that it might be a little
unstable,” says Davies. “(Also) marketing automation, field sales and customer
self-service capabilities are missing.”
This means potential buyers will have to be satisfied with
basic contact management until version two rectifies this later this year with a
possible November release date.
“What it’s got is quite good but it just does not cut it as a
marketing or contact centre solution--it’s not terribly functional as it
stands,” agrees Nick Hewson. However, along with expected improvements in
version two, he does see third party software developers improving this picture
over the next two to three years. For example, Minneapolis, Minnesota-based
Axonom has already developed a marketing module for the platform. This sort of
input from developers could also help tailor what is currently a very
horizontal-looking solution to specific vertical segments.
“Microsoft also has a lot of back-end capability through its
Great Plains software,” adds Hewson. “So it needs to develop a front-to-back
solution, because a lot of SMEs will want to go one-stop-shopping when they
Indeed, Microsoft already has plans on the drawing board to
cater for this trend through its so-called ‘Project Green’ announced last
autumn, which intends to add solutions such as ERP into its .Net
web services framework. The idea is that businesses can then simply pull
whatever modules they want into their system. But, again, users will have to
wait because Project Green is linked with the expected Longhorn Windows upgrade
slated for 2005.
One thing’s for sure: Microsoft will focus on the fledgling
SME market and has no plans to raid the high-end corporate market with its CRM
solution, other than to meet specific departmental demands. It reckons that only
around 10 per cent of the SME market has a CRM solution, compared with most
corporates, making it an immature opportunity and a potential battlefield.
Recently, SAP acquired TopManage, and PeopleSoft bought JD Edwards in order to
strengthen their credentials.
Competition from Microsoft could feasibly be so stiff that
other providers are obliged to carve out their own niche, possibly in specific
verticals or with J2EE solutions, for example. However, in the short-term,
Microsoft’s market entry seems to be good news for everyone, offering choice to
the SME and a boost to the market for its competitors as its marketing dollars
stimulate the whole sector.