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Now that the courts have given Microsoft the green light to bundle everything from its Windows Media Player to its instant-messenger client in Windows, it is staking out much bigger turf.

Now that the courts have given Microsoft the green light to bundle everything from its Windows Media Player to its instant-messenger client in Windows, it is staking out much bigger turf. It now is setting its sights on becoming a significant supplier of application software to corporations.

The software juggernaut, known in the corporate world mainly for personal productivity applications such as its Office suite, is getting ready to take a swipe at the customer relationship management (CRM) market, according to individuals briefed by Microsoft and a written document detailing Microsoft's CRM software plans.

Microsoft's planned entrée into the CRM space -- expected in the first quarter of next year, according to software developers briefed by the company - comes at a time when the company has almost completely saturated the markets for desktop operating systems and applications. The logical and long-rumored next step for the Redmond, Wash., company, which is expected in fiscal 2002 to record an estimated $29 billion in revenue, is to take a stab at selling the enterprise applications that run on top of its Windows operating system.

Enterprise applications represented a $61 billion worldwide market in 2000, according to estimates by the Framingham, Mass., market-research firm International Data Corp. And CRM is one of the fastest growing components of that market, accounting for $6.1 billion, or 10 percent, of that pie. IDC is predicting companies will spend $6.9 billion on CRM applications by the end of 2001, out of a total enterprise application market worth $6.6 billion.

The big question, according to market-research firms like the Boston-based Aberdeen Group: Will corporations bite? Will they see Microsoft's CRM launch as yet more leveraging of a monopoly operating system, backing their executives into a pricing and support corner? Or as a welcome challenge to suppliers, providing an alternative with staying power, compared to the likes of FrontRange Solutions, Inc., Onyx, Pivotal, The Sage Group or even Siebel?

Microsoft made its first foray into enterprise applications a year ago, when it purchased accounting and small-business software vendor Great Plains Software for $1.1 billion. At the time of the deal, Microsoft said it expected to leverage Great Plains' technology to bolster its presence in the small/mid-size business markets, and planned to showcase much of it via the Microsoft bCentral small-business portal.

"I was surprised when Microsoft bought Great Plains about how little reaction there was to them getting into enterprise applications," recalls Chris Fletcher, a vice president with the Aberdeen Group.

Microsoft had publicly and repeatedly committed to having no designs on the enterprise application space, deciding, instead, to leave that arena to its many software vendor partners. Now, however, with the imminent launch of its first customer relationship management (CRM) package -- code-named MSCRM -- Microsoft's plans to jump headlong into the enterprise application market are unmistakable, as detailed in its MSCRM vision document.

When the first iteration of MSCRM launches in the first quarter of 2002, Microsoft will be aiming at mid-size companies of between 100 and 1,000 employees, according to developer sources briefed on Microsoft's plans. But given the software vendor's past track record of pushing Windows, SQL Server, Exchange Server and other Microsoft products, over time, into the data center, it likely won't be long before Microsoft is pitching MSCRM, especially the Professional version, to small enterprises (with 1,000 to 3,000 employees, by Microsoft's definition) and possibly even Fortune 1000 companies.

There are plusses and minuses to standardizing around a single vendor's full family of products, customers admit. Those who put all their eggs in the Microsoft basket can end up with preferential treatment and pricing, as well as products that are more likely to interoperate well than those provided by competing vendors with little incentive to integrate. But Microsoft has no proven track record in the enterprise application space. And the track record it does have, of delivering buggy products for the first few generations of its products, isn't one that most enterprises are willing to bet their businesses on.

Consequently, even some of the company's staunchest backers are cautious about Microsoft's enterprise application intentions.

"I've always been a big believer in Microsoft. I've used DOS since version 1.0," recalls Allan Lindsay, CIO with Merchant First Bankcard, a Schaumburg, Ill., credit-card processing company. "It's like the old days with IBM: At some point, you just say, you can't go wrong with buying them. That's true about Microsoft now."

While Merchant First would take a look at any kind of CRM package from Microsoft, Lindsay says he'd be hard-pressed to switch from FrontRange, the CRM family from the company formerly named GoldMine. And it's not because Merchant First isn't a Microsoft shop. Lindsay has configured FrontRange to interface with Microsoft Word on the desktop, and with Microsoft's SQL Server database on the back end.

"Microsoft has credibility with me, but what they are lacking is maturity" in the CRM arena, Lindsay says. "I put my career on the line and my CEO's money on the line when choosing our CRM package. I had to feel good about our decision."

And robustness is the name of the game for Merchant First. While the outfit is relying on a CRM package targeted at mid-size companies with mid-size needs, Merchant First is using the contact-management capabilities of FrontRange to log and keep track of approximately 13,000 outbound calls placed by its telemarketers each day to small and mid-sized businesses that need to process MasterCard, Visa, Discover and other credit-card payments. Since last December, Merchant First deployed 63 FrontRange seats; it is planning to add another 70 in the coming year.

Lindsay says he considered writing a custom CRM application for Merchant First. He also looked at enterprise CRM packages, such as Siebel, but said the $300,000 to $400,000 implementation cost he estimated such a package would require deterred him.

Microsoft has been rumored for several years to be dabbling with plans for an enterprise CRM push. But as of late November, leading CRM companies - a number of whom are among Microsoft's tightest partners - said they had not been told by Microsoft of any definitive plans to field a CRM offering of its own.

"Microsoft really has been positioning themselves, since they bought Great Plains, as a competitor to thousands of ISVs (independent software vendors)," says Dana Buys, who until November served as CEO and president of FrontRange Systems. If Microsoft does enter the CRM arena, "will any ISVs (independent software vendors) still want to partner with a competitor?" he asks. Such a move could "force other software vendors to move to other databases, because they won't want to feed the hand that's biting them."

According to the MSCRM vision document, Microsoft is building a full CRM suite, consisting of sales force automation, customer service and marketing automation modules. (Marketing automation, which will encompass campaign planning, telesales scripting, campaign management and ROI analysis, aren't slated to debut until the first quarter of 2003, in version 2 of MSCRM.) Microsoft's core CRM platform will include a full range of features, including a business-rules engine (code-named Dragonfly), as well as contact and lead management facilities, email, chat, routing and other Microsoft-developed technologies, sources said. Not surprisingly, the MSCRM will work only with Microsoft SQL Server.

Microsoft is expected to price each CRM module separately, and to offer both hosted/per user-per month and on-premise options, according to the plans detailed in the document. The Basic version of the full suite is expected to go for $750 per desktop user; the Professional version for $1,500 per user. The server version of the full suite will sell for an estimated $2,000 per server, some software developers said.

Microsoft bCentral marketing manager Janelle Poole declined to comment on MSCRM. She said the company was not ready to talk about plans, if it had any, to enter the CRM market.

"The low-end/mid-range of the CRM market is wide open right now," says Aberdeen's Fletcher. But with its focus on turning applications software into a bunch of .Net services (Microsoft's own brand of web services), Microsoft easily could opt to enter any of a number of enterprise resource planning (ERP) markets, Fletcher says. And, they could end up fielding .Net services in all of the leading vertical markets, ranging from financial, to manufacturing, he adds, giving it a launch pad for future plays in a variety of enterprise-application areas.

This article was originally published on 2001-12-10
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