Microsoft CRM Needs Work

Microsoft Corp. (Nasdaq: MSFT) this week overhauled its Customer Relationship Management (CRM) offering in an attempt to gain market share from its rival Salesforce.com Inc. (NYSE: CRM). (See Microsoft Previews CRM Solution.) But the strategy appears undercooked.

CRM technologies, which enable users to manage specific data about their customers, such as buying patterns, are seen as a key IT weapon, particularly in areas such as retail and manufacturing. And research firm The Yankee Group cites customer retention as the number one challenge for 60 percent of sales and marketing executives across all industries.

Microsoft's CRM 3.0 is aimed at plugging the gaps in earlier versions of the product, first launched in 2002. Along with a new diagnostics wizard for faster installation and a range of new interfaces, it introduces a subscription-based licensing model for hosted CRM deployments, which uses the same code as the companys on-site CRM offering.

Traditionally, users have bought CRM software from vendors and deployed it themselves across their own infrastructures. But over recent years vendors like Salesforce.com have started offering "hosted CRM," whereby the vendor does the CRM work as an outsourced service. This is believed to offer users a more favorable return on investment (ROI) than deploying CRM themselves.

However, it is still early days for Microsoft’s hosted CRM strategy, chiefly because it requires customers to work with partners instead of directly with Microsoft. A Microsoft spokesperson would not reveal whether the vendor is planning to move to this model, although she says that customers are getting plenty of choice at the moment. "Whether (the CRM) is delivered on premise or as a hosted solution is based on the specific needs of the customer," she adds.At least one analyst says Microsoft is still getting its act together on the hosted CRM front. “They are still working on their hosted [CRM] strategy. It’s not deployed the way salesforce.com is -- you still have to go through partners,” says Sheryl Kingstone, program director at Yankee.

Salesforce.com, which made its IPO last year, is regarded as something of a trailblazer in the hosted CRM space and has already amassed more than 15,000 customers. To date, Microsoft CRM has been deployed in about 4,000 businesses.

Microsoft has some catching up to do, but it's not hurrying. CRM 3.0 will be available to customers who are licensed to use previous versions of the product in the fourth quarter of this year, and will be generally available in the first quarter of 2006.

As a result, it could be some time before the benefits of CRM 3.0 become apparent. "They have simplified the installation and maintenance but that's one thing that will be hard to test until it is widely deployed," says Kingstone.

— James Rogers, Site Editor, Next-Gen Data Center Forum0