By Matt Rosoff [Bio]
Posted: Mar. 18, 2002

A new server product will help businesses track existing and prospective customers and respond to customer service requests. Microsoft Customer Relationship Management (MSCRM), from Microsoft’s Great Plains division, is designed for mid-sized businesses, and Microsoft insists that it has no plans to enter the enterprise customer relationship management (CRM) space currently served by partners such as Onyx, Pivotal, and Siebel. Nonetheless, the MSCRM announcement is a clear indication that Microsoft will compete aggressively in the packaged business applications space—a market that Microsoft primarily left to partners until its Dec. 2000 acquisition of Great Plains.

MSCRM Tracks Prospects, Customer Requests

Slated for release by the end of 2002, MSCRM is a server application for mid-sized businesses to manage their sales force and customer service representatives. It runs on Windows 2000 or later and features a browser-based interface, although users can also use Outlook to access certain information stored in the application (such as contacts and meetings). It requires SQL Server 2000 and Exchange 2000 (which requires Active Directory) for storing and retrieving data and messages; Microsoft also plans to release a connector for Lotus Notes.

MSCRM will be sold exclusively through Great Plains resellers, and it is designed for companies with 25 to 500 employees, at least one dedicated IT staffer, and a single line of business or several closely related ones. It will compete primarily against mid-range CRM systems, such as Epicor's Clientele, FrontRange's GoldMine, and Oncontact's Client Management Software (CMS), as well as CRM services offered by application service providers, such as SalesForce.com.

Features Include Outlook Integration

The application consists of four functionally integrated parts:

• Sales Automation for keeping track of information about accounts (e.g., contact information, relationship history, revenue opportunity, close date, and so on)
• Customer Service for managing customer queries and complaints
• Activities for managing individual and group calendars and e-mail
• A bundled version of Seagate Crystal Reports (which is also used by many other Great Plains applications) for creating reports from customer data.

The customer service part features an extranet portal for customers to track support incidents themselves, and for businesses to post answers to common questions.

MSCRM boasts tight integration with Outlook. For example, a salesperson will be able to create contacts and messages with Outlook offline, while his manager assigns new contacts and schedules meetings in MSCRM; data will be synchronized bidirectionally between MSCRM and Outlook when the salesperson next connects to the server. In addition, e-mail messages can be filtered by Exchange and guided into the MSCRM system: for example, a message from a known business contact can automatically be added to the appropriate MSCRM modules.

MSCRM can also automatically import data from Great Plains accounting applications (e.g., an account's credit limit or amount purchased last year), and Microsoft is working with ISVs to build connectors for other accounting packages.

Microsoft hopes to make MSCRM available in the last quarter of 2002, but this date could slip, given that the customer portal requires Windows .NET, which has been delayed until the end of the year. (See "Windows .NET Server Delayed" on page 9 of the Apr. 2002 Update.)

Not an Enterprise Product

Microsoft emphasizes that MSCRM was not designed to compete against high-priced enterprise CRM systems from Microsoft partners such as Onyx, Pivotal, and Siebel, and Great Plains will continue to sell Siebel’s Front Office as part of its eEnterprise line. These partners seem to agree: Onyx put out a press release saying that MSCRM will have "little or no impact" on Onyx's core business.

Compared with enterprise systems, MSCRM cannot compete in the following areas:

• Marketing automation, such as the ability to apply advanced analytics to help businesses create targeted marketing campaigns
• Customizability (administrators can change field names and the layout in the UI, but cannot create different UIs for different lines of business)
• Call center support, such as the ability to store scripts for telemarketers (although this will appear in future versions of MSCRM)
• Support for mobile devices.

MSCRM will also cost much less than enterprise solutions. Although Microsoft has not revealed specific pricing information, CRM Product Unit Manager Alex Simons said the goal is to allow organizations to spend between US$20,000 and US$30,000 and get all the necessary component parts—MSCRM itself, other necessary servers (Windows, SQL, and Exchange), and all set-up and integration fees. Comparable costs for enterprise systems are at least US$100,000, and often run into the millions.

Why Microsoft Entered the CRM Market

Microsoft has taken steps into CRM in the past: in 1999, it introduced ClearLead, a CRM platform for ISVs based on its DealerPoint product. In 2000, it introduced a hosted CRM service—bCentral Customer Manager—based on ClearLead.

Nonetheless, MSCRM will be the first packaged CRM software application with Microsoft's name on it, and anytime the company enters a new market, it risks frightening ISV partners that build similar solutions on the Microsoft platform.

Microsoft thought this action was worth the risk because existing CRM companies are not doing a good job catering to mid-sized businesses: according to the Gartner Group, only 20% of mid-sized businesses and less than 2% of small businesses currently use a CRM application.

Microsoft has one advantage that could help it succeed where other vendors have failed in this space: the Great Plains sales channel. Many mid-sized businesses don't understand or are unimpressed by the utility of CRM systems and ignore traditional CRM vendors. Great Plains resellers might have an easier time selling MSCRM as part of an entire business applications package, including accounting software—something that every business understands and needs. In addition, many Great Plains resellers are small accounting or financial services companies that already have a strong relationship with their customers.

In addition to revenues from the product itself, MSCRM could also help Microsoft sell more Client Access Licenses (CALs) for SQL and Exchange—a typical mid-sized business has only a handful of employees who need to see its financial records, but the entire sales force and customer service teams would benefit from accessing MSCRM. Adding CALs to existing installations is a particularly easy way for Microsoft to make money, as it involves no extra support commitments.

Long-Term Implications

MSCRM is a sign that enterprise ISVs could find themselves competing against Microsoft in the market for line-of-business applications. Facing stagnation on the PC desktop market, Microsoft is more focused on selling server software than at any time in its history, and line-of-business applications can drive these sales. While Microsoft will initially use the Great Plains channel to sell these applications to mid-sized businesses (a market which software companies have historically found difficult to crack), it could gradually morph the applications from departmental and small-business products into enterprisewide solutions. That's the path already taken by Microsoft products such as Exchange, Project, SQL Server, and Windows Server.

Great Plains President Doug Burgum has said, "We want to be the leader in providing interconnected business solutions to small and medium enterprises," but Great Plains defines "small and medium enterprises" as companies with up to 5,000 employees, regardless of revenues. Any enterprise vendor who currently sells to these companies should consider itself fair game.