Microsoft finally launches hosted CRM offering

Gartner analyst predicts likely failure for vendor's late entry

Years after nimble upstarts like Salesforce.com Inc. broke ground in the on-demand CRM business, Microsoft Corp. is finally set to launch its own, much anticipated hosted offering today at its Worldwide Partner Conference in Denver.

The offering from Microsoft's Business Solutions unit is based on the next version of its packaged CRM application, code-named Titan, which is due to ship in the fourth quarter. Executives said the hosted offering will initially ship only in North America, with international expansion planned at an undisclosed later date.

Brad Wilson, general manager of Microsoft Dynamics CRM, said the hosted service will come in two versions -- Professional and Enterprise Editions.

The Professional Edition will include all the customization, sales, service and workflow capabilities of the Titan software. The service will be offered without charge through the end of 2007, and then will be priced at $39 per user per month during 2008 and $44 thereafter, he said. An early access release will begin shipping by October.

The Enterprise Edition includes the same capabilities and allows users to continue working in an application independently of the service. Once the user logs back on to CRM Live, the data on the laptop is automatically synchronized with the online database, Wilson said.

The Enterprise Edition will be available in April 2008. It is priced at $59 per user per month.

The Live CRM offering will be sold exclusively through Microsoft partners, who will be authorized to customize the service for users. Microsoft said it will initially host the service in its corporate data centers. By the end of 2007, it will allow partners to host the service as well, the company said.

Wilson also noted that because the Live CRM code base is the same as the packaged Titan software, users can migrate from one to the other at will.

Microsoft's entry into the hosted CRM business comes eight years after the debut of Salesforce.com's service, which now claims some 30,000 customers and a wide variety of available add-on applications. Oracle Corp. also offers a hosted CRM product  while NetSuite Inc. offers integrated on-demand ERP and CRM applications. The latter firm just filed  for an initial public offering to fund an expansion of its service.

Microsoft's late entry into the on demand business, and the lack of add-on products from third party vendors could prove fatal to its effort to enter the market, said Michael Maoz, an analyst at Gartner Inc. The service, he said, "has only a slight chance of succeeding."

He noted that many customers are unlikely to be willing to wait until next year for full access to the enterprise version of the service. Maoz also said that Microsoft will initially be fully dependent on its partners to sell the service, while Salesforce.com also has a strong direct sales organization.

Josh Greenbaum, an analyst at Enterprise Applications Consulting, a Berkeley, Calif.-based consultancy, gives Microsoft a chance for success if they keep the cost of the service well under its rivals.  "This is their intention, to do it based on price and I think they have a chance for a decent amount of success," Greenbaum said.

Copyright © 2007 IDG Communications, Inc.

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