Microsoft Dynamics CRM Comes Alive, Targets Large Enterprises With Version 4

After five years of mostly steady improvement of its CRM solution, Microsoft appears ready to break into the Big Time with Dynamics CRM 4.0 and its on-demand version coming "alive" in Q2.

Here's an update based on what I learned at Convergence 2008, the annual conference for Microsoft Dynamics customers and partners, where I joined nearly 10,000 attendees in Orlando.

"Dynamics" is the brand name for Microsoft Business Solutions (MBS), a collection of acquired ERP products plus a CRM solution it built from scratch. CEO Steve Balmer said in his opening keynote that "pushing into business applications" was the biggest decision of his career, until the recent Yahoo deal, anyway. So far, he says that MBS has been growing 20 percent per year, faster than the industry average.

Not bad, but considering the small base of revenue, and the fact that some SaaS vendors are growing much faster, not exactly outstanding, either.

Microsoft CRM Goes "Live"

Speaking of on-demand, there was much talk of the Dynamics CRM Live solution, due to be available in Q2 (probably in April, some said). It will use the same code base as the 4.0 version shipped late last year, which includes a bunch of productivity and scalability improvements along a multi-tenant architecture. More on that in a moment...

CRM Live gets Microsoft in the game for the small business "sign-up and use" market and will help larger organizations that want to kick the tires or can't wait for their IT department. Karen Brodie, head of her own systems integrator firm based near Ontario, Canada for nearly two decades, has been a Microsoft partner since 1.0 days five years ago. Two years ago, she says, the 3.0 version of the solution became viable for her clients, and now the 4.0 release should help it gain entry into larger enterprises.

Last fall Brodie entered the early adopter program for CRM Live and now has some 23 clients with about 500 users successfully using the on-demand solution. The ability to customize and integrate Microsoft's CRM solutions (on-premise or online), along with that familiar Outlook-like interface, are key reasons why it's been a hit with her clients. And, that's why she recently cut partner ties with another vendor (Maximizer) to focus exclusively on Microsoft.

Got a Windows Live account? Got a credit card? Then you'll be able to get a CRM Live account in a few minutes online. And then, you'll be able to do what on-demand pioneers like NetSuite, RightNow, Oracle (as UpShot) and Salesforce.com have offered for the past decade—CRM on the web. If you're in the US and Canada, anyway. Deployment elsewhere in the world is "TBD."

OK, that's a decade late to the party, but the party's just getting started. What's significant about this development is that CRM Live is designed to integrate nicely with Outlook, which is used by a gazillion people already. Many sales people have complained about having to learn a new CRM tool when Outlook was where they stored their contacts already, thank you very much. Moving contacts between a user's Outlook and the CRM Live system is simple, and there is also a clean integration with Word and Excel.

"Feel IT" to the Rescue?

The bad news, though, is that you hate Outlook, you won’t like the Dynamics CRM interface much either, whether on-premise or hosted. It may be "familiar"—but that falls far short of having "software that people love," which Kirill Tatarinonow (MBS Corp. VP) says is their goal.

I’m going to be watching with great interest in the next year or two to see what comes of the "Feel IT" methodology, done in collaboration with the University of Copenhagen. The idea is to connect to users more emotionally, and move from useful and usable software to desirable. Based on the difficulties Microsoft has had getting Vista established in the market, this is a big challenge, but I applaud the effort. Microsoft products could use a bit more of the "fun factor," even in a business environment.

Pushing into Large Enterprises

Dynamics CRM 3.0 is a solid suite of marketing, sales and customer service technology, with sales automation being the strongest of the three, in my opinion. While CRM 3.0 has been deployed in some large enterprises, 4.0 should accelerate that trend in the 2008 and beyond. Although Microsoft's market entry was primarily with SMBs, now the mix of deals is "balanced" between small/medium and large, according to general manager Brad Wilson.

Global engineering/construction company CH2M HILL spoke at Convergence about selecting Microsoft over Salesforce.com and other industry leaders in a five vendor bake-off. Ultimately, it boiled down to good function; integration with both its IT infrastructure and Microsoft's Office family; a "significant delta" in total cost of ownership, and Microsoft's resources and general heft in the software business.

The new partnership inked with EDS is also a sign that bigger enterprise deals are on the way.

In version 4.0, there are some user productivity improvements to enable easier searching by users, and development of workflows and reports by business users instead of IT, according to product marketing director Bryan Nielson. That's good, but the real action is "under the hood," in my opinion, where Microsoft made big investments to improve scalability, data management, globalization, and integration—all of which help the company penetrate the large enterprise market.

Does "Choice" Matter?

I heard the "Power of Choice" a lot at Convergence. Apparently every presenter was instructed to put in a slide to re-enforce the point that, with Microsoft, you can have your CRM on-premise, partner-hosted, Microsoft-hosted (soon) or some combination.

Of course, Oracle has had this any-way-you-like-it capability for some time, and it's done little to stop the Salesforce.com juggernaut. RightNow used to give its customers a choice between on-demand and on-premise, but stopped selling licenses when it discovered that customers seemed to prefer the hosted model, and to simplify its business model. I rarely hear of customers trying on-demand and then switching to on-premise. Sounds good in the sales process, but once you have something that works, there's often no compelling reason to switch to another deployment mode, while plenty of other projects await.

With Microsoft, though, the key difference is Outlook. Dynamics CRM Live will give users the ability to easily implement and use a CRM solution without learning a new interface. And, the price is about half of Salesforce.com at $59/user/month for a "Professional Plus" account. As I noted in my Top 10 CRM Stories of 2007, "only Microsoft has a fighting chance of putting a dent in Salesforce.com's growth, by commoditizing CRM technology and selling it to companies already deeply invested in Microsoft technology or used to that familiar Outlook interface."

One good example is Nortel, which last year chose Microsoft's CRM solution over Salesforce.com and has since implemented CRM for 3,500 users. Why? Mainly because it was more "comfortable" for sales reps used to Outlook. Being less expensive was a bonus, too, according to a Nortel speaker.

CRM Industry Do-Over

I had a feeling of déjà vu sitting at Convergence. It reminded me of the first CRM conference I attended more than 10 years ago, when Siebel Systems was the hot ticket. Much of what Microsoft is offering now was available from Siebel and others a long time ago.

It's almost like the industry is having a do-over. Over the past five year Microsoft has made steady progress, much the same way that SAP approached—and now leads—the enterprise CRM market. Now things could change more rapidly. Personally, I think Oracle and SAP are going to feel the pressure from Microsoft more than any other vendors, followed by Salesforce.com in large SFA deals. When CRM Live gets fully launched in Q2, and rolled out worldwide at some point in the future, it will have an impact on SMB-focused SaaS vendors, too.

It remains to be seen whether Microsoft can make its business applications more "desirable" and fun to use. I'd also like to see more social web functionality, but suspect that will take at least another year to hit the market, via Dynamics CRM 5.0.

For now, I have to say I've been impressed with Microsoft's progress. The software giant is still playing catch up in CRM, but the gap is closing and deals are going to Microsoft that used to go elsewhere. I expect that trend to continue.

Bob Thompson is CEO of CustomerThink Corp., an independent research and publishing firm focused on customer-centric business management, and founder of CustomerThink.com. Thompson is a popular keynote speaker, blogger and author of numerous reports, articles and papers, including Five Warning Signs for Danger Ahead on Your Customer-Centric Journey. Follow Bob on Twitter.