In-Depth

Microsoft CRM: An Overnight Sensation

Microsoft’s CRM suite is less than two years old, but it’s already being used by 1,600 customers

• By Stephen Swoyer
• 10/27/2004

Nearly two years ago (January 2003 to be exact), Microsoft Business Solutions (MBS) released its inaugural CRM product, CRM 1.0. Then, last December, MBS shipped CRM 1.2, a revamped release that tightened CRM’s ties to Microsoft’s Outlook client, Windows Server 2003, and Exchange.

As a result, analysts say, Microsoft now fields a formidable CRM entry—albeit one that’s distinguished not so much by the depth of its features or the breadth of its coverage but by its reception among customers and resellers.

To date, Microsoft says that roughly 1,600 customers and approximately 1,600 resellers have hopped on board the CRM bandwagon. The average MBS CRM deployment is 25 seats, Microsoft officials say, although some customers—such as H&R Block, with 1,500 users—are supporting far more.

Not surprisingly, CRM has also translated into a cash cow of sorts for Microsoft. In fact, in its first full year as a CRM vendor, Microsoft generated more revenue than hosted CRM luminary Salesforce.com, according to AMR Research: The company netted $148 million in CRM revenue last year, while Salesforce.com pulled in less than half of that ($71 million). What’s more, AMR researchers expect that Microsoft will grow its CRM revenues by 40 percent this year—almost double the growth of Salesforce.com (21 percent).

The upshot, says Ian Jacobs, a principal CRM analyst with consultancy Current Analysis Inc., is that Microsoft has become a force to be reckoned with in the worldwide small and medium enterprise (SME) space.

“While MBS is still new to the CRM market, this has not hindered the company’s ability to penetrate a market that has been inconsistent in sales growth,” he says. “[T]he rate at which MBS is building an ecosystem of resellers and ISVs is indicative of a major advantage that Microsoft CRM has against all of its competitors—its affiliation with the Microsoft brand.”

This doesn’t mean Microsoft will simply bulldoze over its competitors in the SME space, however. For starters, analysts say, Microsoft’s notoriously limited CRM 1.0 and CRM 1.2 offerings still don’t address many potential customer requirements. “Microsoft has also focused on a limited set of CRM functionality, features that it feels are most appropriate to an SME user base,” says Jacobs. “[T]here are still areas, particularly around marketing, where Microsoft should be applying its development efforts or flexing its acquisition muscle.”

In the SME space, Jacobs argues, Microsoft must learn to think outside the shrink-wrapped box, particularly if it’s to keep its thriving partner ecosystem content. “What the company needs to avoid is applying a shrink-wrap mentality to Microsoft CRM, which will erode over time the value-added proposition of its channel partners, its key conduit to prospective customers,” he argues.

Microsoft will address many of the current CRM 1.2’s shortcomings when it delivers its highly anticipated CRM 2.0 release sometime next year. Among the new features, CRM 2.0 is expected to deliver new campaign management, service-scheduling, marketing automation, and business process automation features. It should also boast tighter integration with Microsoft’s bread-and-butter Office productivity suite.

Of course, 2004 hasn’t exactly been a fallow year on the CRM front for Microsoft, either. After delivering CRM 1.2 last December, the software giant augmented the capabilities of that product with both a Feature Pack add-on and the CRM Reporting Pack for its SQL Server Reporting Services offering.

This August Microsoft delivered a CRM Feature Pack that introduced support for wireless and mobile client devices—via Microsoft CRM Mobile 1.2—along with enhancements to CRM’s Outlook integration. The feature pack was made available at no extra charge to users of CRM 1.2.

Last month, at its Professional Association for SQL Server (PASS) summit in Orlando, Microsoft announced a CRM Report Pack that bundled six canned reports and a sample database. Microsoft officials said the reports were designed to help developers support key sales activities, including CRM mainstays such as doughnut charts of revenue grouped by account, industry, salesperson, or territory; detailed account information for a single customer or groups of customers; charts of customers in the pipeline; and lead summaries. The CRM Report Pack is also available free of charge.

Analysts say that offerings such as the CRM Report Packs play to Microsoft’s greatest strength in SME accounts: The ubiquity of its Windows-centric technology stack. “MBS is building a comprehensive portfolio of horizontal e-business applications that positions it as an aggressive competitor in the SME market,” Jacobs writes, adding: “MBS has the advantage of leveraging Microsoft’s own technology stack.”

The CRM Report Pack, in particular, appears to be a hit with customers—although some say Microsoft could have given them more of a head’s up that such an offering was in the pipeline.

“We definitely would take advantage of such a component. It is appealing in that we can leverage our existing infrastructure,” says Chris Ward, a support services consultant with an Australian-based provider of solutions for the financial services community. “Although if we had taken the CRM product at full pace, and also purchased Crystal Reports in order to provide customized reporting, I would have felt a little disheartened by Microsoft's change in direction.”