Analyst says Microsoft CRM a boon to midmarket; potential threat to partners
By Dan Sussman, contributing editor -- Manufacturing Business Technology, 4/1/2004 7:00:00 AM
Microsoft has transformed CRM software into a commodity for small and midsize businesses that is said, at least by one industry analyst, to be a potential threat for some of the software giant's competitors.
Complicating matters is that these competitors are also its partners, by way of making great use of Microsoft technology as a computing platform. While agreeing that Microsoft has grown into a CRM force to be reckoned with, executives from Microsoft brush aside the notion that its partners in the CRM space have much to worry about.
Microsoft established itself as a "player" in the CRM space a little over a year ago with the release of Microsoft CRM 1.0. By the end of the year, it had released version 1.2, and more than 1,000 customers were using the application, AMR Research analyst Laura Preslan told attendees at the firm's Strategy 21 conference. She attributed rapid acceptance to two features coveted by users: tight integration with Microsoft Outlook and Contract Manager; and a relatively low price.
"It's difficult to overestimate the importance of close integration with Outlook. Microsoft Office applications typically are open on users' desktops and are the interface with which users feel most comfortable," said Preslan.
In addition, Microsoft CRM's cost-per-seat is approximately $1,300—far less than the $1,500 to $1,700 per-seat charge of some competitors. "Microsoft has effectively commoditized CRM functionality," said Preslan. "CRM no longer is a matter of little companies struggling for respectability. Now there's a behemoth in the space."
While Microsoft's software is aimed at midmarket users, it also is being used in large enterprises, said Preslan. As an example, she cited one major consumer packaged goods company that has standardized on Siebel Systems' CRM solutions on the corporate level, but uses Microsoft CRM in some of its divisions.
Given Microsoft's marketing clout, and its obvious ambitions in the midmarket applications space, applications vendors focused on medium-size companies—many of which make extensive use of Microsoft technology—face a potent threat.
"Microsoft will get there with business applications," Preslan asserted. "If midmarket vendors don't work on the verticalization and localization of products, they risk having to survive on maintenance revenue streams."
A Microsoft executive who called Preslan's assessment "spot on," regarding Microsoft CRM's applicability at the divisional level within large enterprises, said her view of Microsoft as a threat to its CRM business partners is unwarranted.
"We can't compete with our CRM products in every vertical market. From a functionality perspective, we [need] partners that take us the final step with customers," says Somanna Palacanda, a Microsoft product manager. "There's no way we're going to provide specialized functionality for every type of business in Microsoft CRM, but if a partner wants to provide it, we'll definitely want to do that."
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