Microsoft CRM 3.0: The View From Montana

By DAVID SIMS

TMCnet CRM Alert Columnist

Microsoft's foothold in the CRM market looks a little more stable with the release of its Dynamics CRM 3.0 product, more impressive than its first effort.

It's also a shot across the bow of the increasingly lucrative on-demand model, where companies can rent software delivered online, as opposed to expensive and hassleous (New word! I win $25!) on-site implementations.

So how does an established on-demand CRM player, Bozeman, Montana-based RightNow Technologies, feel this morning with Microsoft fitting their picture on the dartboard last used for Netscape?

Greg Gianforte, CEO of RightNow, has in the past expressed his doubt that Microsoft can really succeed in the on-demand space, contending they would have to basically cannibalize their existing business model, and "Wall Street won't let them do that."

Microsoft Dynamics CRM 3.0's "limited-functionality solution" is designed to compete with other CRM solutions targeted at small businesses, Gianforte says, adding that while Microsoft is "late to the CRM game," they do have "significant resources to gain market share at the low end."

For much more than that, however, Gianforte sees "several major hurdles to overcome with CRM 3.0."

Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO East, January 20-22, 2010. Miami, FL.

Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO East, January 20-22, 2010. Miami, FL.

Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO East, January 20-22, 2010. Miami, FL.

Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO East, January 20-22, 2010. Miami, FL.

Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO East, January 20-22, 2010. Miami, FL.

Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO East, January 20-22, 2010. Miami, FL.

One is single tenant hosting. Microsoft isn't actually hosting the applications, their partners are and will offer single tenant hosting. "One of the breakthroughs in hosting is multi-tenancy, multiple applications on a shared set of hardware, which is the standard for successful software-as-a-service companies," Gianforte explains. "There are no economies of scale or margin in single tenant hosting. This model was introduced in the 90’s and failed."

In other words, Microsoft can either keep its partner and reseller chain happy, or cut them out of the loop, and has chosen to work with existing partners (so they'll keep selling the rest of Microsoft's stuff).

Then there's the channel itself, Gianforte says: "Show us a successful enterprise application software company that used the channel as its main go-to-marketing strategy? There are not any."

And how about selling to the business unit? As Gianforte points out, "Microsoft and its partners have traditionally been selling to IT. CRM needs to be sold to the business unit -- and include IT. It’s a completely different selling environment, with a whole new set of languages and needs that must be understood and used."

So hey, other than their antiquated hosting model, channel strategy for enterprise software, and selling to the business unit, not IT, they're golden. While they may have success on the low end of the market with 3.0, Gianforte allows, "they will be significantly challenged in appealing to the middle market, and global 2000."

David Sims is contributing editor for TMCnet. For more articles please visit David Sims' columnist page.

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