CRM Drives Down-Market

December was a busy month in the enterprise software field, with acquisitions, stock offerings, and new products galore. Two events in particular, however, signify big enterprise's blossoming interest in providing smaller businesses with purpose-designed software instead of lobotomized versions of large-scale applications. On December 4, SAP announced the availability of SAP CRM 2007 at its annual Influencers Summit. While services-oriented architecture (SOA) was the main thrust of discussion, the new CRM was clearly on display as part of the larger initiative. SAP CRM 2007's new user interface is Web-based, streamlined, and user-customizable, with navigation features that wouldn't seem out of place on a social networking site. Analysts have suggested that SAP's efforts are emblematic of the overall direction in which enterprise software is headed. "The next generation of CRM applications will be designed to appeal to sales, marketing, and customer service professionals," Ed Thompson, vice president and distinguished analyst at research firm Gartner, said in a statement. "But they will also be able to support multiple different user interfaces with a clear emphasis on usability and ease of configuration for all types of users...[and will] integrate more easily to form end-to-end processes to appeal to both business users and IT." Two weeks later, Microsoft brought out the release version of Dynamics CRM 4.0, previously known by the code name Titan. Drawing heavily on the appearance and function of other Microsoft products such as Outlook, Office Communication Server, and Windows Workflow, this latest release suggests that Microsoft's long and sometimes shaky development process has borne fruit. "They said they'd [release] by Q4, and Microsoft is infamous for slipping deadlines," says Laurie McCabe, vice president for SMB insights and business solutions at research firm AMI Partners. "I like what I see. For people who are [Microsoft]-centric this is a painless way to deploy CRM. They've taken pains with the look and feel and the integration." The two companies' newest offerings share certain characteristics, including extensive process and workflow automation and serious business-intelligence capabilities. Furthermore, both have ties to multitenant, on-demand deployment: Microsoft released CRM 4.0 in two versions, one of which is explicitly on-demand, while SAP's NetWeaver SOA platform includes support for multitenant deployment. Most notably, however, both offerings are targeting the upper-midmarket, a relatively new playground for the two software giants. SAP has been best known for its large-scale implementations, and made waves with its September 2007 announcement of SAP Business ByDesign, a purely midmarket product developed under the codename A1S. Microsoft, by contrast, has been a darling of smaller businesses due to the ubiquity of its Office applications and Windows operating system. While these products and certain others from Microsoft have found homes at all levels of business, the midmarket was a squishy middle ground upon which Microsoft's feet never seemed comfortable. Both firms are finding initial success and each has a good chance to capture market share, at least according to analysts. "Partners -- Microsoft's channel to market -- are very excited to have something to compete with Salesforce.com," says Sharon Mertz, research director for research firm Gartner. "Most [Microsoft] partners' business models are tuned to custom development and services, and aren't accustomed to running a volume model. Microsoft knows the volume model." Regarding SAP, Mertz says the new interface and the platform upon which it's built are both "simple and powerful." The company is "making some real headway. SAP has brought in new people, who have lots of energy and expertise." Whether either company succeeds in a more volume-oriented business segment like the midmarket -- especially midmarket SaaS -- remains to be seen. Mertz notes that SAP has not performed well in that space to date, and Microsoft must be careful as well. "[Microsoft] competitors who had a systems and services model and tried to go to a volume model, such as SAP, Unica, and Sage, have not done well with the volume product," she says.

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