By Chris Alliegro [bio]
Posted: Apr. 21, 2008

The following an excerpt of a Research Report published by Directions on Microsoft, an independent research firm focused exclusively on Microsoft strategy & technology. More samples of our content, as well as a list of upcoming articles and reports are also available.

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.

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.

What's Ahead

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.

"Overview of Dynamics CRM" reviews the main capabilities of the product for readers who aren't familiar with it already.

"Improvements for Hosters, Large Customers" outlines the new features of CRM 4.0.

"New Development Options for Dynamics CRM" provides a survey of the Dynamics CRM development platform and alternatives for organizations considering customization work on the product.

"Future Directions" notes important gaps in the CRM 4.0 product and provides a guide to likely future releases and features of the product, including Microsoft's planned CRM Online service.

"Requirements, Pricing, and Licensing" explains the software prerequisites of CRM 4.0 and summarizes how it can be purchased for on-premise use by customers, and by service providers who host the product for their clients.

Resources provides a starting point for further reading by customers and partners evaluating Dynamics CRM.