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Microsoft seems to run up against criticism no matter what it does. Recent articles in the press have questioned whether it can deliver on its CRM promise, writes Bloor Research analyst Fran Howarth. Commentators have pointed out that Microsoft's CRM application lacks functionality in such areas as marketing automation and contact centre management.

Microsoft already knows that and admits it openly - this is just a first iteration of its long-term strategy to offer customers a full suite of applications to manage their businesses, including applications such as supply chain management tools in the future.

In bringing out front-office applications, Microsoft is responding to a gap in the market - front-office applications for smaller enterprises. Such applications are considered mainstream among large companies, but Microsoft reckons that only 10% of small enterprises have any kind of automated CRM capabilities at all.

And this is a point that is not lost on the other vendors. Siebel has recently unveiled its hosted On Demand CRM offering and has proven its ambitions to offer enhanced capabilities to vendors through its recent acquisition of Ineto Services Inc, a specialist in hosted contact centre solutions. Faced with a push back against high licence prices from customers, Siebel's hosted On Demand offering provides customers with the functionality that they require, whilst also being able to spread their costs over a longer period. It is a logical step in the broader software market.

Salesforce.com is a recent entrant to the CRM market that has driven much of the acceptance of CRM as a hosted offering. Although the functionality that it offers may not cover the full gamut of options that are available for companies implementing a large-scale solution, Salesforce.com is particularly good at spotting and responding to changes in the marketplace, such as the wish for integration with Microsoft Office products.

This is Microsoft's point. Rather than miss out on sales to vendors that offer integration with its desktop products, it is aiming to capture market share in complementary applications itself. It knows full well that it cannot develop and release the full range of functionality expected in a CRM application in one go, but is concentrating on those most commonly used capabilities that will allow smaller firms to get started in CRM without too great an up front outlay.

And, while it will continue to build out its applications, much of the functionality gaps required by smaller companies will be available in solutions developed by Microsoft's channel partners. Aspective is one such partner that is helping smaller customers to gain the benefits enabled through CRM, managed as a hosted service. For Aspective, On Demand applications are a logical evolution of the ASP model that was in vogue a couple of years ago. And Aspective is looking to partner with other ISVs to extend the functionality further, perhaps into vertical industry-specific capabilities.

So whilst Microsoft's CRM may not yet cater to the needs of all businesses, it and its competitors are working hard on developing products that will let smaller companies benefit from fully integrated front-office applications. CRM products for larger companies took some time to reach maturity, with functionality being enhanced in each successive release. The same thing will happen in the SME front-office application market. There will be interesting developments to come in this market, but companies can at least get started on automating business functions with what is already available. ®

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