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Microsoft details Dynamics Live CRM

Shares risk with partners

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While Microsoft been clear that it cannot make Dynamics Live CRM work properly without partners, it's also clear partners are the canaries in the coal mine in rolling out not just applications but also an underlying platform that's new.

That's a reversal of the Windows and Office story where the platform provider, Microsoft, invested time and money and took the risk to build market share, and then attracted partners. This time around, partners are being asked to share the risk with Microsoft, while Microsoft while takes up to 90 per cent of their revenue on what is - essentially - a growing but relatively unproven market full of hype.

While Microsoft is earnest in going online, on demand is not a proven mass business market outside of Silicon Valley. Microsoft chief executive Steve Ballmer conceded on demand is largely a consumer idea that's yet to see much traction in the enterprise or small and medium business (SMBs). That leaves partners targeting up to a third of the two million customers that Microsoft's business solutions group corporate vice president Tami Reller claimed use Dynamics today.

It'll be partners that have to devise pricing that works to grow this market. While Microsoft's price undercuts Salesforce.com, partners have the freedom to add their mark up.

Six hundred application and service providers are today testing Dynamics Live CRM with prices kicking in at $80 to $90 per user and running up to $150. Microsoft clearly factored this in by pricing so low, but price creep could see partners' offerings lose their competitive advantage against Salesforce.com.

Partners will certainly need to build in margin to absorb the expense in sales, marketing and support of selling on-demand to mid-market customers that was revealed by NetSuite's IPO filing last week. With $29bn in the bank, Microsoft can easily absorb the costs - partners will find it harder unless they build in that margin.

Pain Points as a Service

Price alone, though, won't be enough to convince customers to run their business on Dynamics Live CRM - it'll take useful features and service maturity. And here's the next problem: the unproven and evolutionary nature of Dynamics Live CRM. Microsoft believes it's proven itself running and provisioning large, hosted services like Hotmail and Spaces and delivering onsite applications.

However, important things like Service Level Agreements (SLAs) and whether when rolling out service updates it should update all users or just make it possible to update groups are still up in the air. Wilson called these simple policy decisions, but the reality is these are areas existing providers like Salesforce.com, for example, have - through bitter experience - already sorted.

Microsoft is also departing from the spirit of on demand with a contract that could make repeat business hard for partners. Customers cannot downgrade contracts, only cancel them by paying penalties. That'll make things hard from a customer relations perspective for partners who will inevitably make mistakes in building services that work - or fail.

Technologically ambitious and creative partners risk being frustrated by the limited customization potential in Dynamics Live CRM with risk takers potentially getting in hot water with Microsoft. Partners won't be allowed to deploy server-code on Microsoft servers, making Dynamics Live CRM's customization an interface and workflow thing. While Utlschneider believes this should be enough for most, experience proves that even in the closed source Microsoft world, partners and developers like to fiddle and reverse engineer - a fact that causes friction with Microsoft over the terms and conditions of their license and intellectual property considerations.

Finally, having taken the risks, there's the ever-looming specter of Microsoft. The company has a disposition towards entering partners' markets. This time, while Microsoft is clearly relying on partners to tailor Dynamics Live CRM, it's not clear how far Microsoft will require customers to go through partners. While some executives stuck to the party line at the Worldwide Partner Conference, others indicated customers would not be turned away if they wanted to sign up with Microsoft instead of partners.

Microsoft is clearly reaching out to partners. While there are obvious financial incentives on the table, key questions remain about the underlying service that can only be answered by Microsoft or as a result of this year's early adopter program. The question for partners will be when to leap and how much of their precious development and marketing resources to invest in an idea that's got clear possibilities but is still subject to phenomenal hype. So much hype, even Microsoft is treading carefully. ®

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