Big Fish, Small Pond? Microsoft Gears Up for CRM

Microsoft is preparing to enter the customer relationship management software market, causing considerable worry in the field. But some industry analysts are wondering whether Microsoft can thrive in the market.

The announcement in February of the impending release of Microsoft CRM — aimed at the small-business market — had some industry watchers concerned that Microsoft might dominate the field, as it has in other business sectors, and muscle out competitors lower on the food chain.

But Microsoft must first prove that it is ready for the CRM market, which differs greatly from the markets targeted by its other products, said Eric Schmitt, senior analyst at Forrester Research, Cambridge, MA.

Microsoft CRM is set for a fall release. Microsoft president and chief operating officer Rick Belluzzo, who will step down May 1 in hopes of starting his own company, had been a major proponent of Microsoft's move into the CRM space, Schmitt said.

However, Schmitt said Microsoft should get ready for a whole new ballgame. Most Microsoft products are out-of-the-box programs that enjoy lofty profit margins, Schmitt said. In contrast, CRM systems often take weeks to install and have lower profit margins and longer sales cycles.

Also, CRM clients demand intimate, long-term service to help them get their expensive and complicated new software operating. Just setting up a toll-free help line won't do.

“It requires a culture change,” Schmitt said of Microsoft's entry into the CRM market.

The CRM project is being handled by Microsoft Great Plains, a division created last year when Microsoft purchased Fargo, ND-based technology firm Great Plains Software Inc. Great Plains' experience in CRM includes offering its own field customer service management product and reselling Siebel's Front Office product.

“We are pretty familiar with the CRM space,” said Lynn Tsoflias, CRM product manager for Microsoft Great Plains. “We're just adding to our offerings.”

If there is anyone who can rejoice about Microsoft's entry into CRM, it's the users who will benefit from the Microsoft CRM product, Schmitt said. Thanks to its considerable wealth, Microsoft can afford to invest a significant amount of money in research and development without expecting an immediate return.

Microsoft's core value has been providing technology that is easy to use and affordable, Schmitt said.

“Say what you will about them,” he said. “Microsoft does understand how people interact with software.”

Most of the big names in CRM, such as Siebel and PeopleSoft, have little cause to worry about Microsoft CRM, Schmitt said. Microsoft has given no indication that it covets their markets.

Microsoft has assured its big-name partners in the CRM field that they have nothing to worry about in terms of competition from Microsoft itself. The Siebel product resold by Microsoft Great Plains is an enterprise-level system, a larger scale than is planned for Microsoft CRM.

“We're focused on small- and mid-sized businesses,” Tsoflias said. “It's a different space than some of our other partnerships in the CRM area.”

CRM technology provider Onyx, a Microsoft partner, did not seem worried when it responded to the announcement of Microsoft's CRM product.

“Microsoft Great Plains' future entry into the CRM market will clearly be targeted at small businesses and small mid-market companies,” Onyx said in a statement. “As such, Onyx believes Microsoft's market entrance will have little or no impact on Onyx, its market position or its existing partnership with Microsoft.”

Schmitt said it is possible that Microsoft will try to expand its presence in the CRM market in the near future.

“I wouldn't rule out the possibility that, down the road, they would acquire somebody just to get market share,” Schmitt said.

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