Microsoft's Weapon In Web Apps: Keep 'Em Cheap

Lagging Salesforce and others in the hosted CRM market, Microsoft will try to win customers with lower pricing.
Microsoft slowly is getting its software-as-a-service act together. At the company's Partners Conference in Denver last week, executives outlined plans to compete with, Oracle's Siebel, and RightNow in Web-based CRM applications. Potential customers will have to be patient, though. Microsoft's CRM Live apps won't be available until sometime next year.

Kevin Turner: Competition? What competition?

Competition? What competition?
Microsoft chief operating officer Kevin Turner got a laugh from the crowd during a demonstration of the service when he asked Dynamics CRM general manager Brad Wilson about Microsoft's newest competitors. "Salesforce? Siebel?" Turner quipped. "There's an opportunity there?"

The opportunity is for Microsoft, a laggard in hosted applications, to catch up, which it will try to do by offering its apps at lower rates. The enterprise edition of Microsoft's CRM Live, which includes offline access, will be available for a monthly fee of $59 per user, about half the going rate, while a more basic professional edition lists for $44 per user each month and will be available for $39 per month through 2008. "Microsoft is the last one" to the market, says RightNow CEO Greg Gianforte. "Welcome to the party."

InformationWeek Download

Analysts rate Microsoft's CRM efforts behind those of the market leaders. Microsoft's Dynamics CRM 3.0 doesn't match the features of competitors, according to Gartner. Indeed, Microsoft wasn't specific about which features will be available in CRM Live. A First Albany Capital report last week predicted that Microsoft's products may end up resembling Salesforce's lowest-tier apps. "When you have an inferior product, you have to have an inferior price," jabs Salesforce CEO Marc Benioff in an e-mail interview.

Despite the lack of product clarity and the fact that it's late to the game, Microsoft poses a challenge to Salesforce and the others. Businesses may go for a Microsoft alternative, says Forrester Research analyst Bill Band, pointing to easy integration with Outlook and other Microsoft apps as a strong selling point.

CRM Live will include a full spectrum of marketing, sales, and service capabilities, which sales-focused vendors like Salesforce and service vendors such as RightNow lack. Even though Gianforte says RightNow doesn't expect to see Microsoft in competitive bids, he might. Microsoft's improved its CRM software significantly, and Gartner now ranks Microsoft as a "challenger" in the sales force automation market.

CRM Live professional edition will include customization, sales, workflow, and service features, while the enterprise edition adds the ability to work offline with leads, service campaigns, and contacts, and synchronize data automatically when a user goes online. More is in the works. Microsoft is developing a "broad range of service offerings," Wilson says.

Microsoft is aiming CRM Live at small and medium-sized businesses, but it's not ruling out large companies. Wilson says CRM Live will scale, that Microsoft's on-premises CRM software is finding success in big companies, and that the company might soon announce some large customers. They're "the most quickly growing sector of our business," Wilson says.

CRM Live represents a threat to Microsoft's partners, some of which already host custom versions of Dynamics CRM. On stage, Wilson insisted partners could continue their involvement through consulting, by generating customer-specific data models, and by developing add-on software similar in concept to those available on Salesforce's AppExchange. Live CRM will be based on Microsoft's next-gen CRM code base, Titan, which serves as a software development platform. So Microsoft will try to keep its partners happy, even as it competes for the same customers.

Editor's Choice
Brandon Taylor, Digital Editorial Program Manager
Jessica Davis, Senior Editor
Cynthia Harvey, Freelance Journalist, InformationWeek
Terry White, Associate Chief Analyst, Omdia
John Abel, Technical Director, Google Cloud
Richard Pallardy, Freelance Writer
Cynthia Harvey, Freelance Journalist, InformationWeek
Pam Baker, Contributing Writer