Midmarket CRM: Microsoft Weighs In

Will Microsoft CRM catch on with mid-size corporates?
Alix StuartDecember 1, 2002

Faced with the prospect of Microsoft invading their territory, midmarket customer relationship management (CRM) vendors, including SalesLogix Inc., FrontRange Solutions Inc., and UpShot Corp., are racing to offer customers more for less.

Ironically, one of the new features some companies are touting is simpler integration with back-end systems, including Microsoft Outlook (to keep sales leads handy in a single address book, for example). Midmarket CRM players are also focusing on price and expandability. founder and CEO Marc Benioff has been on the road describing how his company’s $65 per-user/per-month Web-based service will evolve into an all-in-one application. “My dream is to go from campaigns to sales to customer service to cash [management],” he said at a recent client gathering, indicating that functions like contract management, billing, and order invoicing were soon to come.

Analysts say the new attention to the midmarket has been a boon to companies that are somewhere between using index cards to keep track of their customers and needing top-tier systems like Siebel Systems Inc.’s. “The failure rates have gotten so bad with some of the other products, a lot of companies are saying, ‘Let’s just try something like and see how it goes,’ since it doesn’t require any upfront cost commitment,” says Giga Information Group analyst Erin Kinikin.

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And even though a system like allows for less tailoring than its software-based competitors, says Gartner analyst Joe Outlaw, “most small and midsize companies don’t have very complex processes, so they don’t need to or don’t want to spend the money to customize.”

In fact, midmarket players now claim they can meet the needs of large companies, particularly those that are comfortable with an outsourced approach. “We’re seeing a lot of Fortune 500 companies that a couple of years ago wouldn’t have looked at hosted solutions,” says Keith Raffel, chairman of UpShot, a hosted CRM product. While many of those new clients, like Xerox and American Airlines, are using the product at a divisional level, he says others are using it more widely.

Even without the entrance of Microsoft, which began offering Microsoft CRM this month, midmarket CRM would be plenty competitive. Those companies can take some solace in the fact that Microsoft is, for now, marketing its product cautiously to avoid stepping on the toes of CRM vendors like Onyx and Pivotal, which it is counting on to build .NET-compatible products. The software giant argues that since 90 percent of midmarket companies have yet to buy CRM software, there is room for many vendors.

Priced at $1,295 per user (plus a $1,990 server licensing fee), Microsoft CRM will tout strong integration with Outlook and enterprise resource planning systems from Great Plains and Navision (two firms it owns and through which it sells its CRM product). A scaled-down version that does not include ERP integration goes for $395 per user, plus a server fee of $995. A hosted version will also be available through Microsoft partners such as

But analysts say it’s only a matter of time before Microsoft’s scope expands. The product “has good basic functionality that will take [it] further up the midmarket than Microsoft is really positioning, especially on the support side,” says Kinikin. When a major player enters a software space dominated by relatively new companies, it can paralyze the market. Kinikin suggests that companies get their feet wet with low-cost Web-based solutions while they wait to see how the Microsoft product develops.

Competitors, of course, will raise hard questions about Microsoft’s various efforts to move beyond operating systems and shrink-wrapped applications and win a bigger piece of the enterprise applications market. “The most interesting thing to me is that they’ve been out there talking about .NET and Web services,” says Raffel, “and they’re not offering a Web service at all. So what’s the point of [going with] Microsoft?”