Analysis: CRM Is Microsoft's Next Billion-Dollar Baby

FROM CRM Magazine -

Microsoft already claims 7,000 CRM customer accounts and 180,000 CRM users worldwide. The big challenge will be enticing large customers to help the software move beyond its SMB roots.

By Barbara Darrow, CRN July 5, 2006 URL: http://www.informationweek.com/story/showArticle.jhtml?articleID=190300116
Microsoft is banking that its CRM, after a slow start, will become the company's next big money-maker. While it might not hit Office-type numbers any time soon, it could still be the next billion-dollar baby, executives say.

In a series of recent interviews, Microsoft executives repeatedly brought up CRM—the current Microsoft Dynamics CRM 3.0 release shipped late last year--as the next big apps opportunity.
"CRM could easily be the next billion dollar business for Microsoft," said Margo Day, a regional vice president who just moved to that role from her post as vice president of the U.S. Partner Group.

Microsoft, Redmond, Wash., claims 7,000 CRM customer accounts and 180,000 CRM users worldwide.

Partners agree that the latest release, with its tight Outlook integration, has made great strides from its predecessors. They cite, in particular, easier navigation—it takes far fewer clicks to perform common tasks. And, the fact that it looks and acts like Outlook means that sales people, who often refuse to use complicated programs, actually use it, partners said.

Some Microsoft Business Solutions-focused partners still beef that they cannot make the margins they expected on CRM since Microsoft put it into broad distribution two years ago. But even some of those naysayers say it makes a good add-on sale into existing Microsoft ERP and infrastructure accounts.

Microsoft itself estimates that a typical 50-seat CRM deal is worth $153,000. Of that total, $50,000 goes to CRM software, $40,000 for other Microsoft software, $8,000 for ISV software, $50,000 in services and $5,000 in mobility contracts.

And, while Microsoft maintains that its CRM and ERP solutions specifically target the SMB market, the company is getting serious about entrenching them in enterprises as well, if only to surround and link to legacy "big iron" applications from SAP, Siebel, Oracle and others.
Simon Witts, Microsoft corporate vice president of enterprise and partners, is likewise enthusiastic on CRM prospects, both inside and outside the company. "Since 3.0, it's been a different discussion," he noted, saying he used to counsel partners and insiders alike to tout its use in departments and small groups.

Microsoft is now running 10 pilots of Dynamics CRM internally, and that "my goal is to surround Siebel with Microsoft CRM," Witts said.

And he intimated that the enterprise push will get stronger. "In July at our own sales conference, my pitch is CRM everywhere, not just departments. And don't worry about the scale of the customer."

Because Dynamics CRM is available through broad distribution, and can be part of volume Enterprise Agreements (EAs), it is an easy adjunct sale to Office, some partners say.
As part of a broader reorg announced last Wednesday, the CRM development group under David Thacher is moving into Office under vice president Kurt DelBene. MBS vice president Satya Nadella will continue to run the roadmap, according to the company.

Microsoft COO Kevin Turner, who joined the company ten months ago after 20 years with Wal-Mart is also bullish on MBS' overall business applications mission.

MBS posted a loss of $13 million on revenue of $216 million for the third quarter ending March 31, 2006 and represents a tiny portion of the company's overall earnings. But it is a closely watched part of hte company viewed by many as a pivotal piece of the company's future.
Oracle has bought a huge chunk of the business applications market with its PeopleSoft and Siebel Systems buyouts in the past few years. But SAP still dominates the overall market. Both Oracle and SAP are trying to come down into the midmarket from their enterprise positions of strength, while Microsoft is seen moving up from its SMB base.

"I'm super stoked about MBS and where we need to take it," Turner told CRN. He reiterated the mid-market target but with an important addendum: "Certainly I think our ability to scale our ERP system up is something where we're constantly pushing the envelope and I think we'll be able to compete at the high end."

More Third Party Analysis of CRM 3.0 - Gartner

Gartner is the largest and most well respected Industry Analyst Firms. They have a large CRM analyst practice and are the thought leader in the space to advise CEOs and CIOs on IT and IW strategy for CRM evaluation etc.

Independent Analyst Firm Evaluates Microsoft Dynamics CRM 3.0
A report published by Gartner, the leading analyst firm in the technology industry, provides the latest evaluation of Microsoft® CRM. The August 2006 report, titled “Status Report on Microsoft Dynamics CRM 3.0,” discusses the product’s first year on the market as well as customer reaction to the solution.

“Gartner believes there’s a growing market for ‘pragmatic CRM,’” said Brian Prentice, research director with Gartner and the author of the report. “This involves deployments, usually in subsidiaries and business units of Global 2000 organizations, along with discrete midsize businesses, in which the goal is to achieve higher user adoption rates for a system that automates one or two straightforward end-to-end sales, marketing and service processes, or a broader set of department-specific processes.”

Wilson said the recognition by CRM Magazine and the Gartner report affirms Microsoft’s strategy for developing and delivering powerful and affordable CRM solutions on a global scale.
“We believe this recognition by CRM Magazine and the Gartner report echoes what we’ve been hearing from our customers and our partners,” Wilson said. “We offer a CRM product that’s easy to use, easy to deploy, and easily configured to meet the unique needs of businesses. The level of worldwide customer demand confirms the power of our vision for Microsoft CRM.”
Microsoft Dynamics CRM 3.0 was received with great acclaim when it was introduced late in 2005, and has since achieved great market success around the world, with more than 7,500 customers and 250,000 users. The company recently announced plans for Microsoft Dynamics CRM Live, a Microsoft-hosted CRM service that offers complete product functionality and a transparent migration path to the Microsoft CRM on-premise and partner-hosted offerings.
An electronic version of the Gartner report is available at http://www.microsoft.com/presspass/itanalyst/default.mspx.

To learn more about Gartner, interested parties can visit http://www.gartner.com.
www.productivegap.com - Austin, Texas - CRM Specialists.