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Microsoft CRM 1.2 Targets Other MS Apps

Microsoft is about to unleash an upgrade to its year-old customer relationship management software with enhancements that tie the product even closer to other Microsoft applications.

But one analyst said Microsoft had better rethink its CRM strategy if it thinks customers are going to wait years before seeing a CRM product that provides essential functions like marketing, campaign management and customer service. Currently, Microsoft's CRM 1.2 only provides a sales feature on stand-alone machines.

Slated to arrive early next year, Microsoft Business Solutions CRM 1.2 is a minor upgrade over its current 1.0 offering, essentially adding multi-language support (nine different languages) and tie-ins to other Microsoft products.

A Microsoft spokesman said CRM 1.2 adds increased functionality with new data evaluation and lead tracking tools, as well as improvements to its user interface and the ability to customize the sales function within Outlook.

The upgrade also lets companies use CRM with Windows Server System 2003, Exchange Server 2003 and Small Business Server 2003.

Steve Bonadio, an analyst at META Group, said CRM 1.2 isn't a bad product but it leaves plenty of room for improvement. There are several items lacking in Microsoft's software, he said, that will make it a hard sell to new customers.

"One of them is enabling the implementation of the application in a distributed environment to support companies that might have offices across the country or across the globe," Bonadio said. "There are some architectural limitations which, I would think if they were really serious about the market, they'd be addressing, but every time I ask them, it's, 'Oh yeah, it's on our roadmap, we'll get to it.' "

As it stands, CRM 1.2 works well for customers who want a sales-oriented product in a standalone environment. But Bonadio said people shouldn't confuse it with a software suite that offers marketing and other CRM functionality.

The software's limitations also call its customer base into question. Microsoft makes much of its 1,000 customers, but Bonadio said outside its one major client, H&R Block, the customer base is likely shops with 10 to 15 users or divisions within a corporation.

As the enterprise software market continues to mature at the Fortune 1000 level, more and more software makers -- like Oracle , SAP and PeopleSoft -- are looking for new ground to cover. One of the largest unconquered sectors for enterprise apps is the small and medium business (SMB) space.

Microsoft, with the popularity it enjoys through the Office product line, has become one of the few U.S. software companies positioned to capture a significant market share within the SMB market. Earlier this year, Deutsche Bank praised Microsoft for being one of the first large software companies to cater to the SMB.

Other companies have been rushing to follow suit, paring down corporate version of their products to accommodate SMBs. Where it seems Microsoft is focusing on the sales side of CRM first and expanding outward, IBM is scaling down its enterprise On Demand suite to an Express package for SMBs, while Oracle has scaled down its 10g to garner SMB attention.

But Microsoft has questions it needs to ask itself. Will customers wait to buy a robust CRM application from them when mid-market companies like salesforce.com already have a full solution set? Can they afford to build out functionality on the once-a-year upgrade plan they currently have laid out?

"Waiting for Microsoft is not a good strategy," Bonadio said. "Even by version two, they are not going to be competitive with CRM suites that have been in development for 10 years. There's just no way they can do all that."

Microsoft plans to put an annual timetable on CRM platform upgrades, and will release CRM 2.0 in the first quarter of 2005.

While a Microsoft solution isn't always palatable with larger enterprises today who use both Microsoft's .NET and Java's J2EE Web services frameworks (Microsoft only supports .NET), the software giant is popular with SMBs throughout the United States. Even large companies ask about Microsoft, even if the product isn't suited for their operation. That's one of Microsoft's greatest strengths -- mindshare.

"Even when I'm working with large enterprises who are making CRM decisions, a lot of time I'll get asked the question, 'well what about Microsoft's CRM?' because, well, they're Microsoft," Bonadio said. "Very quickly, you find out that there's no way Microsoft's CRM will meet their needs adequately or perform or scale adequately. But they're asking the question, which is a good thing (for Microsoft)."

Microsoft said its software is designed to be easily enhanced using standard application program interfaces , extensible markup language and the simple object access protocol .