Hosted MS CRM: No Big Threat

Microsoft seems determined not to leave any market opportunity unexplored as it works to become a full-service CRM vendor, taking on both the giants of the packaged software business as well as the growing online sector. Surebridge, a midtier application services provider (ASP) based in Lexington, MA, recently announced its CRM Online hosting program, which delivers Microsoft CRM software in a hosted model, and promises same-day turnaround for new customers who want to join the service. The model calls for customers to purchase their own Microsoft CRM licenses (which Microsoft says range from $395 to $1,295 per user) and host them on Surebridge resources for a $99 per user per month commitment, plus startup costs and minimums. Despite this partner foray into the ASP CRM space, it does not represent a major component of the Microsoft plan, says Christopher Fletcher, an Aberdeen Group vice president and CRM research director. "I would not say this is anywhere near their main strategy," he says. "Their main strategy is to work through VARs, partners, and distributors to get the Microsoft suite into as many hands as possible." While the entrenched players in the online CRM space seem satisfied to bask in the glow of the indirect compliment being paid by Microsoft's dive into their waters, the incumbents are quick to distance themselves. "We think their approach is flawed because they're taking licensed software and hosting it. You still have to buy software licenses, and you still have all of the maintenance hassle because of the way it's architected," says Julie Choi, vice president of product marketing at UpShot. She dismissed the possibility that Microsoft would spur a change in the way Upshot approaches customers. "[Our] core fundamental reason for being doesn't change because Microsoft is here." Salesforce.com chairman and CEO Marc Benioff is even less enthusiastic. "Microsoft is deceiving the marketplace by calling their solution online or on-demand," he says. "It's just a bunch of Microsoft software running on somebody else's data center." He dismissed the possibility that Microsoft might eventually tailor its delivery model to more directly compete with the likes of Salesforce.com or UpShot. "Microsoft does not like the on-demand business model. It's not good for them, because when Salesforce.com is sold, no Windows NT or Internet Information Server or Active Directory or Great Plains or BizTalk Server is sold," Benioff says, referring to the various infrastructure components that Microsoft CRM connects with or requires. Fletcher acknowledges that the incumbent online providers have the advantage in functionality today, but adds that if Microsoft's .Net online services integration catches on with greater force, the MS CRM approach may resonate better with customers. ".Net holds the promise of [tying applications together]...that's a direction Salesforce.com is not moving in today."
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