Microsoft releases first update for its hosted CRM service

IDG News Service - Microsoft Corp. today added Internet marketing features to its Dynamics CRM Online software, the first in a series of planned updates for the set of hosted applications that the company launched earlier this year.

Internet marketing functionality is a staple of customer relationship management applications, including software-as-a-service (SaaS) offerings. Microsoft said its addition of the technology will enable Dynamics CRM Online users to create search-based marketing campaigns, capture sales leads from corporate Web sites and weigh the effectiveness of marketing campaigns from the standpoint of click-through and conversion rates, among other capabilities.

In addition, the new release — officially called the September 2008 Service Update — will "provide customers with increased scale for teams of multiple thousands of employees," according to Microsoft's announcement.

Microsoft has made some aggressive marketing moves of its own in launching Dynamics CRM Online. For example, in an effort to jump-start adoption, the software vendor last month gave its business partners the chance to buy licenses for the Professional Plus version for a monthly fee of $19 per user, a significant drop from the standard price of $59 per user.

But Denis Pombriant, an analyst at Beagle Research Group LLC in Stoughton, Mass., said that Microsoft must focus on features as well as cost as it tries to compete with Salesforce.com Inc., the hosted CRM market leader, as well as other SaaS vendors.

Microsoft's entry into Internet marketing "is very important for several reasons," Pombriant wrote in an e-mail. "First, it was a hole in the offering. And since big players like Salesforce have it and their customers depend on it for some of their market outreach, it would be impossible to pry customers away from Salesforce without such functionality."

Pombriant added that Internet marketing is one of the key elements of so-called CRM 2.0 architectures. "I would not say it is the only or most important part of the strategy," he wrote. "But like any three-legged-stool analogy, if you don't have it, you are hobbled."

Rob Bois, an analyst at AMR Research Inc. in Boston, echoed Pombriant's comments.

AMR is getting a lot of inquiries from clients whose companies "are trying to improve the overall accountability of marketing," Bois said. "The average vice president of marketing is under more scrutiny today than ever before."

Microsoft needed to quickly deliver some type of new functionality for Dynamics CRM 2.0 customers in order to meet the upgrade expectations it had set, according to Bois. "They did sort of promise they were going to do regular updates for the online service," he said, adding that living up to that promise "was important for Microsoft from a political standpoint."