The software maker says the time has come to offer business software in versions that are both hosted and not hosted.
Denver — Microsoft is sharpening its blades for battle in the CRM Software as a Service space, going after Salesforce.com with a highly competitive subscription price schedule.
Microsoft has been busy readying its online plans lately, shaking up its Windows Live and search teams and tipping its hand at plans for Microsoft-hosted versions of many of its enterprise products.
Aiming to rally its partners around the reality of hosted software, Microsoft Chief Operating Officer Kevin Turner told them it was a matter of financial life and death.
“We have to change faster internally than the world is changing externally or we will be obsolete,” Turner said, as part of his speech, which kicked off Microsoft’s Worldwide Partner Conference here.
The company added to its managed services strategy Tuesday, detailing its upcoming CRM Live product and in the process knocking on the doorstep of software-as-a-service stalwarts like Salesforce.com, NetSuite, and RightNow.
It has released its subscription fees — a schedule that suggests it is gearing up for a price war with primary competitor Salesforce.com.
The Enterprise Edition of the software will be available for $59 per user per month, about half the industry average, while the Professional Edition will list for $44 per user per month and available at the promotional price of $39 per user per month in 2008.
It also demoed new preconfigured vertical templates in the public sector and manufacturing industries, and announced new strategies to further engage its partners in penetrating the market.
While change is hard, Turner said Microsoft’s partners need to be ready to offer customers the choice of running software on their own servers or subscribing to hosted services. “It does not mean locally based software is going away, but customers want the choice.”
CRM Live enters the arena as Microsoft readies a new generation of its CRM product line, and will use the same code base, code-named Titan, as the on-premises software and partner-hosted software.
Titan — and CRM Live — both are scheduled for release later this year, but Microsoft will begin to add early-adoption program customers to the Live service, hosted from a Microsoft data center in Virginia, starting in the fall. Users will be able to access CRM Live either through their Web browser or through Microsoft Outlook.
This flexibility is becoming increasingly important to firms, especially when they project the total costs of using on-demand for more than the first few years, Richard Smith, vice president and CRM practice director for Green Beacon Solutions, told CRM Buyer.
“What most people do not realize about hosted applications is that once you have made that investment, it is hard to get off,” he remarked. While it may not make that big of a difference to a company when it starts out with 20 employees using [a system] — five years and 50 more employees later, the company could well decide it is cheaper for it to own its license in-house.
Transitioning without a vendor-approved plan in place, though, can be problematic and costly.
It is this sore spot — the total cost of ownership of on-demand — that Microsoft is targeting.
The service will come in two flavors, Professional Edition and Enterprise Edition. Professional Edition will include customization, sales, workflow, and service features, while the Enterprise Edition includes the ability to work offline with leads, service campaigns, and contacts, and synchronize data automatically when the user goes back online.
That capability represents a growing trend in the software-as-a-service world; as Microsoft execs are quick to point out, even Salesforce has an offline edition. Further editions may come later, as Microsoft’s general manager for Dynamics CRM Brad Wilson says Microsoft is “developing a broad range of service offerings.”
Microsoft is also giving customers a sneak preview of Microsoft Dynamics Live CRM this quarter through the remainder of 2007. It is offering the professional version of the service free to customers during the early access period, after which normal service fees will apply. Customer sign-up will be offered through Microsoft Dynamics CRM’s network of certified partners.
However, the idea that Microsoft can compete solely on price in this space is one that Bruce Francis, vice president of corporate strategy for Salesforce.com does not buy. “Lower list prices are a strategy for a company that does not understand on-demand and has an inferior product,” he told CRM Buyer.
Nevertheless, on-demand users are beginning to put price at the top of their buying criteria now that the Software as a Service model is moving to maturity, Smith said. In other words, it is no longer seen as a short-term experiment but as a permanent solution.
“The price point is a fairly competitive move,” he said. “I think that Salesforce.com and other vendors will be forced to react at some point.”