Microsoft tweaks CRM to improve hosting

Microsoft is due to improve the hosting capabilities of its customer relationship management application with the global release of a new version of its Dynamics CRM 3.0 software Monday.

The vendor is to make its Dynamics CRM Professional Edition for Service Providers software available to partners at its Convergence 2006 conference in Dallas through Tuesday.

“I expect one quarter to one third of our CRM business will end up being hosted over time, probably over the next 24 months,” Brad Wilson, general manager of Microsoft Dynamics CRM, said in a phone interview.

Microsoft formally entered the already crowded hosted CRM market with the likes of Salesforce.com and Oracle’s Siebel late last year. The company released Dynamics CRM 3.0 and a subscription licensing model of $24.95 per user per month in December. Before then, a few of its partners had hosted Microsoft’s CRM software, but at a much higher price.

Rival SAP launched its on-demand CRM service last month, but its system carries a 100-user minimum limitation. By contrast, Microsoft is positioning its hosted CRM software for companies with 20 or more seats, according to Wilson.

As more and more customers look to evaluate hosted CRM, it’s important for Microsoft to more aggressively offer that capability, according to Laurie McCabe, analyst with AMI Partners. However, Microsoft’s model is different from other players in that it has yet to be fully tested in the market.

“Microsoft develops the software, service partners host it and VARs [value-added resellers] sell it,” McCabe said. “That’s three layers.” By contrast, companies like Salesforce.com and NetSuite have “a close feedback loop” to their customers since they develop, deliver and host the software, she added.

NaviSite and Telecom Italia are among the partners already hosting its CRM software, according to Wilson. “It’s not going to be Microsoft CRM hosted in someone’s closet,” he quipped.

Microsoft will advise users on what issues should be addressed in contracts with hosting providers, not only around SLAs (service level agreements), but also in relation to privacy and data ownership concerns, Wilson said. The software vendor hopes that its partners will build additional functionality on top of the vanilla Microsoft CRM software, particularly services targeting specific industries and geographies, he said.

Microsoft is also due to announce on Monday the first of a number of prepackaged connectors.

The company will announce that a connector between Microsoft’s CRM and its Dynamics GP ERP (enterprise resource planning) applications is now available, with connectors for its other ERP software Dynamics NAV and Dynamics AX out in the first quarter of 2007.

“It should be easy to connect Microsoft to Microsoft,” analyst McCabe said. “The bottom line is they have to do it and they’re kind of late.”

A Microsoft CRM connector to the company’s BizTalk Server and integration with Oracle’s Siebel CRM software should become available in the third quarter of this year. Connector templates integrating Microsoft CRM via the company’s BizTalk Server into ERP applications from Oracle and SAP will appear over the next 12 months, according to Wilson.