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CRM's Must-Have
Microsoft Business Solutions is releasing its own CRM product.
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Customer Relationship Management (CRM) Defined
Today, few companies would dream of operating their business without a documented record of financial transactions. However, companies commonly operate without a central way to track their prospects and customers and the company's interactions with them. When a key sales, service, or marketing employee leaves a company, often so does the intimate customer knowledge that employee has built. Due to government imposed accounting and financial reporting rules, the concept of corporate memory has been taken for granted in the back office. With the proliferation of CRM, corporate memory will soon be seen as equally important in the front office.

For those not familiar with CRM, you may think of it as the front-office counterpart to the financial and accounting systems found in the back offices of companies. Whereas the accounting and operations personnel of a company need a system to track payables, receivables and the like, so the sales, service and marketing personnel need a system to track sales opportunities, revenue forecasts and customer interactions.

Those readers who are in the CRM community are most likely aware that Microsoft Business Solutions is releasing its own CRM product. The release of Microsoft Business Solutions CRM will fill a gap in the Microsoft division's offering and will complement the Great Plains applications acquired by Microsoft more than two years ago. Regardless of your viewpoint, few will argue that the introduction of Microsoft Business Solutions CRM will have a significant impact on the CRM market.

Roots in the Rolodex

The Great-Granddaddy of CRM is the wheel of business cards known as the Rolodex. For about $39 you can still buy one and neatly house all your contacts' business cards alphabetically. Of course, the data is tough to share and it's not the most portable solution, but it has served a lot of people very well. Electronic versions of the Rolodex gave way to contact management software, which was networked, expanded, and evolved into CRM.

A close cousin to Microsoft Business Solutions' CRM product is Microsoft Outlook, which handles email, contacts, tasks, and calendar functions. While this product is widely used and offers great functionality, it does not allow a company to maintain a common record of prospects, customers, and the interactions with them.

Microsoft Business Solutions' first true CRM offering came in the form of a partnership between it and CRM industry leader Siebel Systems. Microsoft Business Solutions and Siebel created the Great Plains Siebel Front Office offering with integration to the Great Plains accounting and financial applications. This offering, while acclaimed for its comprehensive functionality, didn't achieve wide market penetration. With the release of Microsoft Business Solutions CRM, Microsoft Business Solutions has officially announced that it will no longer offer the Siebel product.

Microsoft Business Solutions is now approaching the CRM space with its own in-house designed and developed product, Microsoft Business Solutions CRM. The product will have a significant impact on the CRM market and the existing players. There are several reasons for this:

Integration with Exchange and Outlook
Microsoft Business Solutions' CRM product will be fully integrated with Microsoft Exchange Server and will have a disconnected client that leverages the MSDE version of SQL Server 2000 and is fully integrated with Microsoft Outlook. Since many companies use Outlook/Exchange and most corporate employees make this their principal collaboration tool, this integration is a huge selling point. Consider the following statistic: there are currently in the neighborhood of 110 million Outlook licenses that have been sold to date. In contrast, an average size CRM vendor with 1,000 customers averaging 75 licenses each would have on the order of 75,000 licenses, roughly .07 percent of the number of Outlook licenses. Other CRM vendors have created Outlook integrations to their products, but none will rival the level to which Microsoft Business Solutions has developed its integration.

Vendor Confidence
Most companies look beyond the product they are evaluating to see if the vendor is financially stable and is taking the product in the right direction. Microsoft's financial position is in stark contrast to that of many existing CRM software vendors'. When evaluating an existing package that may have more features than Microsoft Business Solutions' first release, most companies will not doubt that Microsoft will execute on their promise to add functionality and continually move the product forward. While the first release of Microsoft Business Solutions CRM will focus on sales and service functionality, future releases will include customer and partner portals as well as expanded marketing capabilities.

Partner Support
Microsoft Business Solutions will offer the CRM product through the partner channels developed by Great Plains and Navision, a recently acquired European provider of financial, accounting and ERP solutions. Currently Microsoft Business Solutions has 4,500 global channel partners. While some of the lower-end CRM vendors have reasonably strong partner channels, you can expect many of those partners to sign on to offer Microsoft Business Solutions CRM. The presence of so many partners adds significant sales capability as well as support for the product. When purchasing Microsoft Business Solutions CRM, companies will feel confident that they will always have options for local support when needed. Most CRM vendors cannot make this claim. Additionally, Microsoft Business Solutions CRM partners are busy building add-on products for CRM. At the time of this writing, there were no less than 40 add-on solutions available through the Microsoft Business Solutions partner channel.

Built on .NET
Microsoft Business Solutions CRM will be the first Microsoft application suite to be built on the Microsoft .NET framework. For those unfamiliar with .NET, you may think of it as the building blocks of a newer, more sophisticated breed of software. .NET allows for quicker construction and a stronger end result in software development. The fact that Microsoft Business Solutions is building its CRM product on .NET is significant for several reasons. First, Microsoft is betting a lot on .NET and is very aware that the CRM product will reflect on .NET overall. The quality of the CRM product will be very important to Microsoft. Second, many existing CRM software vendors are working towards upgrading their products to .NET architecture. So, Microsoft Business Solutions is already ahead in that respect. Finally, .NET performs well and provides flexibility beyond previous development tools.

Familiarity, Compatibility, and Ease of Use
User adoption has long been one of the most insurmountable obstacles to CRM success. By offering a familiar and easy to use interface, Microsoft Business Solutions is gaining a tremendous advantage over its competitors. Observations from initial Microsoft Business Solutions CRM trainings and previews show that users learn the system quickly and find it to be very intuitive. Beyond the integration to Microsoft Outlook, Microsoft Business Solutions CRM has integration points to other Microsoft Business Solutions applications and the underlying operating systems.

Reporting
Another failing of CRM has been in the area of reporting and analytics. Microsoft Business Solutions CRM will ship with more than 100 reports to address the needs of the majority of users. Further, the reports are created with Crystal Reports, a tool that has already gained wide acceptance in the marketplace.

International Support
With the recent acquisition of Navision, Microsoft has gained a huge European sales channel and has accordingly placed emphasis on releasing international versions of the CRM product. The release of these versions has been slated to occur in the second half of 2003. Internationalization is significant in that it represents a compelling reason for companies with non-U.S. operations to standardize on Microsoft Business Solutions CRM.

Complete Suite Offering
With the addition of Microsoft Business Solutions CRM to its solutions and services, Microsoft Business Solutions expands its fully integrated suite of applications including CRM, Accounting, Supply Chain Management (SCM), Enterprise Resource Planning (ERP), Field Services, and more. This will allow companies to purchase all their corporate systems from one vendor knowing that the applications will integrate properly. The suite concept has worked well for PeopleSoft, SAP, and Oracle and appears to be the trend for business applications.

Bottom Line
Microsoft Business Solutions introduction into the CRM market will affect existing CRM players in a number of ways. First, the smaller CRM vendors with whom Microsoft and Microsoft Business Solutions acknowledge competition face a very tough road. It is possible that some of these vendors may disappear altogether. The existing middle-tier vendors will need to merge or partner with back-office vendors or focus on specific verticals in order to maintain their positions. The impact on the business of middle-tier vendors will not be as immediate as with the lower-end vendors, but it will exist and increase as Microsoft Business Solutions and its partners continue to expand the functionality of Microsoft Business Solutions CRM. The larger CRM vendors that already offer a suite of front- and back-office applications will be the least affected. However, they will face increasing competition from middle-tier vendors seeking refuge in their market space. Larger CRM vendors will potentially compete with Microsoft Business Solutions as divisions of large companies adopt the solution, but generally the larger vendors will experience the least impact from Microsoft Business Solutions' product.

Many existing CRM vendors have reacted to Microsoft Business Solutions' latest entrance in to the CRM market by stating that the move validates the demand for CRM in the mid-market. While this statement may be true, it is hardly a situation where demand is exceeding supply and a "high tide will raise all boats." More realistically, Microsoft Business Solutions will bring the tide with it and in the process sink some boats.


John Gravely is president of Lys Solutions. He was formerly director of consulting for the professional services team of a mid-market CRM software vendor. In this capacity John oversaw dozens of CRM implementations across multiple industries. Prior to leading the consulting group, John was a hands-on consultant implementing CRM solutions at major accounts including Dreyfus Mutual Funds, FSC Securities, AT&T Chile and Internet Security systems among others. John has a degree in engineering from Clemson University and a Master's in International Business (MIBS) from the University of South Carolina.

Laura Brown is president and founder of System Innovations, where she consults to companies of all sizes on CRM, process integration, and other large-scale business automation projects. Her client list includes Fortune 500 companies such as Ernst & Young, General Electric, Bank of America, BellSouth, GTE Wireless Services. and Delta Airlines. Laura speaks regularly at conferences and educational forums and is the author of Integration Models: Templates for Business Transformation (September 2000, SAMS). Her business and technology articles are featured online at informIT.com, EACommunity.com, systeminnovations.net and ganthead.com.


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