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Microsoft Questions Growth Prospects

Will the hot CRM vendor be a cloud computing shooting star? Rival exec says R&D investments won't measure up.

Microsoft is now spending $9.5 billion per year to provide the infrastructure that will be required for the cloud computing era. By comparison, is investing only $120 million in research and development and won't be able to keep pace with the Amazons, Googles and Microsofts of this world.

This assessment, served up by Microsoft Business Solutions Corporate VP Michael Park, can be seen as a blatant attempt by a cloud computing Johnny-come-lately to cast doubt on one of the movement's pioneers and leaders.

Never mind that, launched in 1999, has more than 80,000 customers while Microsoft Dynamics CRM Online, introduced in April 2008, is clearly in catch-up mode. Microsoft says Microsoft Dynamics CRM has 23,000 customer firms with 1.4 million users, but it doesn't break out on-premise versus online.

(Gartner figures for 2008 ranked third in the total $9.15 billion CRM market, behind SAP and Oracle, respectively, with 10.6% of the market. Microsoft ranked fourth with 6.4% of the total CRM market. SAP, Oracle and Microsoft still get the vast majority of their CRM revenues from on-premise apps while Salesforce is delivered exclusively through the cloud.)

And try to forget that Microsoft Azure, introduced late last year, recently surpassed the 10,000-customer mark., in contrast, says its platform as a service is "road tested and trusted by nearly 60,000 companies." And more than 200,000 developers are said to have joined the program.

Don't think about the present. Microsoft wants you to consider the future and the capacity for to play in the big leagues. For starters, Salesforce is on track to reach $1.3 billion in revenue this year. Cash-rich giants Microsoft, Google and Amazon are projected to reach $62.5 billion, $23.6 billion, and $24.5 billion in revenues, respectively.

Park says Microsoft's multi-billion-dollar investments are being made in data centers worldwide in support of Microsoft Business Productivity Online Services (BPOS), Hotmail,, the Azure platform, and Dynamics Online applications.

Park shared his thoughts in connection with last week's release of the beta version of Microsoft Dynamics CRM 2011 (in both online and on-premise versions). The final online release will go live in 41 languages and 40 different markets (in a first-phase) in January. Other markets will be added as data-center capacity grows.

Salesforce is putting roughly 10% of its sales back into R&D, according to Park, and he notes: "When you look at what Salesforce has to do to maintain its installed base, invest in data-center infrastructure, and continue to move the applications forward, $120 million isn't a lot to cover all those needs."

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