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By Allen Bernard February 7, 2003 The verdict — at least the one from analysts and competitors — is in: Microsoft's foray into hosted customer relationship management (CRM) will do little to derail existing software-as-a-service providers and may even help the industry's overall visibility once Microsoft's marketing efforts kick into high gear.
More Bark Than Bite ... For Now An entry price point of $395 per user won't help Microsoft's case when competing with hosted providers charging around $100 per user either, said Kevin Scott, a senior analyst at AMR Research. To compete, Microsoft would have to discount heavily. "I don't think it affects the Salesforce.com's really all that much," he told ASPnews. "One it's not available yet and two it's a different price point." Scott said he believes the hosted offering is more of a marketing ploy than a serious attempt to penetrate the space. Once they get the product established, Microsoft will, as it has in the past, move up market, not down. "I just don't see the ASP offering really being a big hit in a $100 million, $200 million, $1 billion-size company," he said. "I think it's just more them trying to make some news, trying to generate some interest around the fact the product is shipped. At the end of the day, I think they are looking much higher than that." If this is the case, then the drastic reduction in IT spending over the past 18 months and redirection of existing resources into other areas such as security and cross-platform integration initiatives, will hurt Microsoft's chances of making any kind of big splash in either the online or boxed-product market space, Gartner's Outlaw said. "Many of these companies are still struggling with some of the operational systems, the accounting and ERP kind of systems that they felt they needed to run their businesses," he said. "The top priorities for mid-sized businesses this year are really around security, upgrading infrastructure for efficiency and preparing for enterprise-wide applications." Competitors Weigh in Because Microsoft's offering is indeed client/server software that is available only through partners, Net-native players like Salesforce, UpShot and RightNow are not wringing their hands over lost revenues just yet. This, however, does not mean this group is not taking the move seriously. "Microsoft is a formidable competitor in any marketplace," Greg Gianforte, CEO and founder of ASP RightNow, a customer service-centric CRM provider, told ASPnews. "They're going to bring a lot of resources to bear here so they will take a segment of the marketplace." Also, Microsoft's hosted offering is not a true subscriber service, he said. Instead customers purchase the license, implementation and maintenance from Microsoft and then pay the channel partner provider to host it for them. But, like Mulla-Feroze, RightNow's Gianforte views Microsoft's move more as just another player, albeit a big one, entering the CRM market; especially since its offering is not built on the multi-tenant architecture so necessary to achieve the economy of scale so needed for hosted application success. "The question to ask Microsoft is 'Can you put thousands of customers on a single box and have it work efficiently?'." Do you have a comment or question about this article or the ASP industry in general? Speak out in the ASP Discussion Forum. |