Dynamics CRM 4.0 is the latest release of Microsoft's customer relationship management (CRM) server application, which helps workers manage customer support, sales, and marketing and provides a platform for custom front-office solutions. This version delivers new features for hosting multiple organizations on shared servers and improved international support to better serve large, multinational organizations and service providers that host CRM solutions. However, service providers will soon be competing directly with Microsoft's own CRM online service, and large organizations will continue to need custom development to tailor the product to their businesses.

This report provides an overview of Microsoft's Dynamics CRM product for potential customers and partners and outlines the major improvements in CRM 4.0. It provides a primer on the product's development platform, explains the technical requirements and licensing of the product, and previews the most likely future developments, including Microsoft's plans to host an online CRM service.

Introduction

CRM Increasingly Important

Dynamics CRM has evolved into an important product for Microsoft and the partners who resell and customize it. First released as Microsoft CRM in Jan. 2003, Dynamics CRM has garnered about 14,000 customers with over 600,000 seats as of the first quarter of 2008. About half of the product's growth in 2007 was attributable to sales to enterprises, thanks in large part to the efforts of Microsoft's systems integration partners, such as Avanade. (For a description of Avanade's Dynamics CRM efforts, see the sidebar "Going Big with Dynamics CRM".) Dynamics CRM also has been important for resellers because it drives adoption of products and technologies that it requires or integrates with, including SQL Server, Exchange Server, Outlook, and the Office suite.

The Dynamics CRM product is one leg of Microsoft's competitive CRM strategy, which targets enterprise business application leaders Oracle (which fields the Siebel CRM application) and SAP, both of which have a growing presence in the CRM and enterprise resource planning (ERP) midmarket. Dynamics CRM also competes in the small and midmarket with products from ISVs Onyx, RightNow Technologies, and Sage and service provider Salesforce.com, the top vendor of hosted CRM solutions, in a fragmented market that is approaching US$10 billion.

The other leg is Dynamics CRM Online, a Microsoft-hosted online service based on CRM 4.0, which will open to general customer signup in midyear 2008. The service has been running since the second half of 2007 with a set of trial customers and will target small and midsize customers lacking the desire or necessary skills to run complex applications like CRM in-house, a sizable market segment as demonstrated by Salesforce.com.

Enhancements in CRM 4.0 support this strategy—the release includes features for hosting multiple organizations on shared server hardware, which makes the product a better platform for service providers (Microsoft among them) offering hosted CRM to small customers. In addition, CRM 4.0 improves multilanguage and multicurrency support, both of which make the product more suitable for large, multinational organizations. However, the launch of CRM Online will also put pressure on partners such as Navisite and CRM OnTarget that already offer hosted solutions on Dynamics CRM. In addition, large organizations will continue to need custom development to tailor the product and integrate it with other important business applications, such as ERP systems.

Overview of Dynamics CRM

Dynamics CRM is a collection of client applications, Web applications, and databases that aim to help organizations manage front-office processes, such as sales, marketing, and customer service.

Out of the box, the product supports three main front-office processes:

Customer service. Dynamics CRM provides tools for logging, assigning, and tracking customer incidents or cases; creating and managing knowledge bases, such as collections of articles describing problem-resolution steps; and scheduling and dispatching service calls, which is particularly useful for companies that do onsite installation, maintenance, and repairs.

Marketing. The product includes features that help front-office workers manage marketing activities, such as advertising campaigns and mass mailings. For example, an organization could use Dynamics CRM's marketing features to select lists of potential customers for a campaign; assign, track and manage work activities, such as creation of marketing literature; send bulk e-mails to customers; and manage responses from customers. (For an overview of how Dynamics CRM handles responses to marketing campaigns, see the illustration "Managing Campaign Responses".)

Sales. Dynamics CRM stores and manages information about customers and products; tracks customer communications, such as e-mails and phone calls; identifies and qualifies leads; and tracks and manages quotes, orders, and invoices.