MS takes a tilt at mid-market CRM
A foot in the door
The Microsoft Corp juggernaut is preparing to rumble into the CRM market. The Redmond, Washington-based software giant has unveiled plans for a CRM solution aimed at the small to medium-size business sector.
Microsoft CRM, slated to ship in the US in the fourth quarter 2002 with phased shipments outside North America from the first quarter 2003, will provide sales and customer service capabilities plus integration with Great Plains and other Microsoft back office software.
The sales force automation aspects will cover areas such as customer tracking and lead management, with rules based workflow to assist with the automation of opportunity management. On the service front the emphasis is on incident routing and problem resolution through "Case Forms" that provide a total view of customer support incidents, a knowledge base of articles and FAQs and a customer portal to enable web-based customer self service.
Decision support based on all-round customer views will utilize reporting tools to help with tasks such as sales forecasting and identifying a business' most profitable customers. On the integration front Microsoft Sales and Customer Service modules will work with Microsoft Outlook, enabling users to view customer and account contacts, sales leads, activities, tasks, appointments and email from the Outlook client. They will also integrate with Great Plains back office data such as accounts, contacts, sales orders, payment history and so on.
As it stands the offering looks rather basic, restricted to sales and service capabilities with no reference to marketing automation or campaign management. It can also be classified as first generation operational CRM, which focuses on automating internal business processes rather than breaking out into collaborative and analytical functionality.
As such it will not present a challenge in the short term to Microsoft's CRM partners such as Pivotal Corp and Onyx Corp, who offer broader based, more sophisticated CRM suites, based around Microsoft technology. However, it is reported that its CRM partners were not aware of its plans to move into the mid range CRM market and its long term strategy.
In the longer term there is more of an issue as the Microsoft CRM product will be built on the .NET platform - development moves its partners are also in the midst of making - and will compliment its other mid market business offerings including bCentral Customer Management, iCommunicate, Great Plains Enterprise Field Service, Solomon Field Service and Siebel Front Office. The fact that the CRM suite is to be integrated with the bCentral applications and built for the .NET architecture effectively means Microsoft is adding extensions to its widely used Office suite. With a presence on the vast majority of desktops within SMBs, it has a ready-made customer access point.
Other CRM vendors such as Interact Commerce Corp, now owned by UK-based Sage Group Plc, who are not wedded to Microsoft and .NET will also have reason to worry once the Microsoft products are on the street, especially as Microsoft appears to be taking the same successful development route Sage did. Sage built accounting software for the mid market and added functionality, most recently in the form of CRM, through its acquisition of Interact Software. Similarly Microsoft gained access to back office accounting and business management applications through Great Plains and is now adding CRM modules.
Sage was tight-lipped about the implications. In a statement it said: "Sage always welcomes competition but we are never complacent. We believe that our strong brand, broad product range and excellent reputation for customer service and support will serve us well in the attractive CRM market, which we entered last year with the acquisition of Interact. We will be watching the development of this new product offering with interest - at the moment there is little to go on regarding price and positioning."
In the mid-market the most successful strategy is to provide core business applications such as accounts and add to it as user requirements develop, so it makes perfect sense for Microsoft to adopt this approach. In fact vendors are hurling themselves into the mid market, and for good reason. Research house Jupiter Media Matrix estimates that the purchases of CRM, e-commerce and financial management applications by small to medium size businesses will grow from $971m in North America in 2001 to $3.4bn in 2006. No vendor dominates the lucrative mid ground.
Microsoft CRM will not impact the high end packaged CRM vendors such as SAP AG, PeopleSoft Inc and Oracle Corp, who all have broad, strong, highly developed suites, because Microsoft is not targeting this end of the market. They will clash to a degree in the mid market however, as the high end enterprise vendors are all keen to take a piece of this. But while they are targeting the top-end medium to larger mid-range players, Microsoft is going after the lower end, the small to medium businesses.
Aberdeen Group believes that Microsoft is redefining what CRM and ebusiness is about, maintaining that its Passport, .NET and .NETMy Services (formerly known as Hailstorm) are set to change the rules of the CRM game. In Aberdeen's view Microsoft's aim is to become a supplier of Internet based applications and services, providing the key technologies, architecture, services and business partnerships needed to do business on the web.
Where most vendors supply full CRM or point products within CRM such as sales force automation or campaign management, Microsoft supplies infrastructure level software and applications to support those CRM applications, and has a presence on the vast majority of SMB desks with its Office suite of applications. With Great Plains it gained basic accounting and business management software - traditionally core applications for SMBs - and is now branching out to front office applications in the form of CRM. By building them on the .NET platform it adds to the software as services phenomenon, positioning itself to offer the infrastructure, the application and the applications as a service.
The move to break away from packaged software business models is significant. It is what .NET is all about, and Microsoft is not alone in pursuing the alternative software as a service business model. Oracle Corp is aggressively pushing the model, particularly in the mid market, and PeopleSoft is also developing its ASP channel. Salesforce.com, a relatively new but highly successful builder of enterprise CRM applications, delivers them as an online service. It has 3,800 customers and tripled its revenues last year. Commenting on Microsoft's CRM activities, Fergus Gloster, VP marketing and business development for Europe said: "It highlights we are in the right market sector and functional areas. The approach is radically different."
He has concerns with how Microsoft is implementing the technology. " [Customers are] still looking at a SQL Server base, it requires a technology stack," he said. "Our view of software as a service is that when you build a building, you don't own the water or the utilities, you don't care how they get there, so long as they provide the solution. In relation to CRM, [with Microsoft] you still have to buy the hardware and software."
Microsoft bought Great Plains 15 months ago and this is the first significant announcement it has made regarding its $1.1bn acquisition. But the success of the Great Plains and CRM plans are reliant on the still largely undefined .NET platform. CRM vendors need to keep watch, but they do have time to devise Microsoft workarounds.