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Will Great Plains Cause Great Pains?

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Posted March 8, 2002 By Beth Cox     Feedback

FEATURE: If you're in the CRM business, you know that Microsoft is eyeing your lunch; the question is, just how hungry is the Redmond giant?

Microsoft is making a bold move into the customer relationship management (CRM) market, and the question being asked in executive suites at established CRM companies across the country is simply: "Will Microsoft Great Plains cause Great Pains?"

Anytime the Redmond, Wash.-based software giant starts eyeing your bread-and-butter business, it's bound to cause more than a little nervousness.

"Whenever the big guys (SAP, Oracle, Microsoft) focus on anything, competitors should be concerned," said Larry Goldman, vice president of Chicago-based Braun Consulting.

"Ask Netscape," he proclaimed.

He added that Microsoft puts together "very user-friendly software that cooperates with much of the desktop software and a standard look and feel. You would be silly not to respect this type of competitor."

Microsoft said recently that its Customer Relationship Management product will be available either late this year or early in 2003 via its Great Plains unit. A beta version of the software, which is being built from the ground up using the .Net framework, is expected to be available early this summer.The software will be aimed at small and medium-sized businesses and will be available as a standalone product as well as an integrated solution to Microsoft Great Plains Dynamics, Solomon and eEnterprise. Microsoft Great Plains says the productwill "handle the full range of sales and customer service functions."

Seems like it could eventually handle a full range of, ah, more competitive functions, too. San Mateo, Calif.-based e-business applications software provider Siebel Systems Inc. , which has an integration deal with Microsoft, would not even make a company rep available for an interview on the topic of competition.Instead, the company issued a terse statement saying: "MSFT and Siebel Systems continue our successful partnership. Our CRM offerings do not compete and target separate markets with differing needs." Siebel 7, the latest version of Siebel eBusiness Applications, and the Microsoft Windows 2000 Server and Microsoft .NET Enterprise Server family were integrated in the deal announced last October.

It's true that Siebel is one of the market leaders for CRM apps in use at large corporations, and Microsoft says it's going after the small- to medium-business (SMB) market.

In fact, Microsoft's official position as stated is that "our commitment to our partners remains unchanged. CRM partners have been briefed on our announced CRM solutions ... (and) no, we do not have plans to target the enterprise in the CRM space."

But already some analysts are saying that Microsoft may soon be looking to make an acquisition in the CRM arena to serve the mid-sized enterprise market.

One of the rumored targets is a partner of Microsoft in the CRM space, Onyx Software Corp. in Bellevue, Wash., which was prompted to issue a statement that said:"Microsoft Great Plains' future entry into the CRM market will clearly be targeted at small businesses and small mid-market companies. As such, Onyx believes Microsoft's market entrance will have little or no impact on Onyx, its market position or its existing partnership with Microsoft."

A spokesman for Interact Commerce Corp., makers of SalesLogix, a CRM product aimed at small and mid-size companies, told InternetNews.com that they have been expecting Microsoft's move "since our acquisition by Sage last May, so it's not a surprise." Interact is a subsidiary of the Sage Group plc.

"The SMB space is a target-rich market with very low penetration," said Tim Fargo, general manager of Interact's Saleslogix division. "We feel Microsoft's move into the market, validates the strategy (delivering integrated front-office/back-office applications to small and mid-size businesses) we have been executing for over a year with our sister division in the U.S., Best Software. 'Co-opetition' is standard in the software business. To that end, we will continue our efforts to develop within the Microsoft platform and specifically .NET initiatives."

Target rich or not, though, Microsoft's entry is going to change the market, at least in the view of former Oracle executive Marc Benioff, now the CEO of privately held customer relationship management ASP salesforce.com.

In a memo to employees, he wrote that "Microsoft Great Plains will cause 'Great Pains' to the software CRM players who built their products in Microsoft's path. Onyx, Pivotal, Purple, Sales Logix, and yes even Siebel, will begin to feel the pain of competing with an undifferentiated, dated software-based solution. These software players will be the next Borland, Ashton Tate, Lotus, and Word Perfects of CRM (they will no longer exist)."

Benioff, a believer in the ASP approach, says that Microsoft CRM as a software product "requires lots of different license fees -- the fuel of the Microsoft financial engine."

His memo reminded the salesforce.com staff that the company's technology and business models "are differentiated as a utility." Benioff's memo, pehaps aimed at bolstering morale in the wake of Microsoft's plans to enter the playing field, said that "if you believe as we do, that it's the end of software, and that the Internet will spawn utilities -- then we are your only answer."

Not everyone believes it's the end of software, however. Goldman at Braun Consulting told InternetNews.com that he thinks the ASP's value proposition "is based on low cost of ownership and quick implementations. In the smaller companies where IT resources are limited, this value proposition will still resonate. But if Microsoft can be convincing that installing CRM software is like installing Word, ASP's might have a problem."

And of course, many of the small fry are lining up to ride Microsoft's coattails.

Already ManagedOps, a Bedford, N.H.-based ASP wholesaler, has announced that it will offer its Managed Operations outsourcing service for Microsoft's customer relationship management product, which was announced yesterday.

ManagedOps CEO Dan Taylor recently told ASPnewsthat while he hasn't seen Microsoft's new CRM product yet, the company's 200 reseller partners will offer the CRM software either as an on-premise product or as a hosted application.

So clearly if you're in the CRM game, you need to be thinking ahead.

"This will be version one of the Microsoft software while the other vendors are very mature," Goldman said. "These vendors need to continue to verticalize their software for key CRM industries like telecommunications or financial services, provide scalability, focus on reporting and analytics, and come up with creative pricing plans if this software starts to be given away with the Great Plains software or other Microsoft toolsets."

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