Could This Be Microsoft CRM's Last Stand?Could This Be Microsoft CRM's Last Stand?

This time, Microsoft better get it right. It's been nearly three years since Bill Gates & Co. unveiled a customer-relationship-management application for small and medium sized businesses to much fanfare and tepid market reaction. Now it's taking a second crack at CRM--replete with promises from CEO Steve Ballmer that the company will give on-demand juggernaut Salesforce.com a run for its money--and if it misses the mark, it might not get a third try.Some 18 months after its first-edition CRM hit the street, Microsoft was preparing to take the wrap off version 2.0, but beta customers remained underwhelmed, albeit with some valuable feedback: throw it back to the programmers to do A, B and C, and an acceptable product could become much more than that.

Microsoft listened, and it did something that Salesforce could never, ever muster the resources to do: It decided to invest an additional 100 engineering years in refining the technology. Of course, with that kind of R&D commitment comes expectations. And those expectations get ratcheted up another level when a vendor decides to skip version 2.0 all together and go straight to version 3.0, as Microsoft has decided to do with its CRM offering. It also is trying to create logical synergies between its CRM product and its other business applications (Great Plains, Axapta, Navision and Solomon) by lumping them all under the snazzy new brand name "Dynamics." Of course, whether the new version of Microsoft CRM proves to live up to the "Dynamics" label remains largely unknown, as execs have offered little detail on Microsoft Dynamics CRM 3.0, which is expected to become generally available by the end of the year.

Here's what I do know, based on a conversation I had recently with Brad Wilson, GM of Microsoft CRM:

-An English-language version will hit the market in December. Four additional languages will follow in early 2006--Dutch, French, German, and Russian--with 18 more planned after that.

-Microsoft is promising the ability to create custom objects that can be used to automatically generate Web services interfaces. Like Salesforce, and to a less successful degree, Siebel Systems (soon to be part of Oracle), Microsoft is trying to simplify the development of custom CRM apps, and give customers the ability to create role-based capabilities. The product is built to plug easily into services-oriented architectures.

-The software will feature a new high-speed synchronization engine for workers interacting with the CRM system remotely.

-A more robust marketing automation module promises to give folks outside of marketing the ability to schedule marketing campaigns using a simple wizard.

-In keeping with its flashy new Microsoft Live strategy (reported here by Aaron Ricadela commented on hereby Mitch Wagner), Microsoft Dynamics CRM 3.0 will be available as an on-demand service through Microsoft's vast partner network, complete with a new subscription-based pricing model.

Certainly, there's enough in that brief description to get a sense of where Microsoft is going with its CRM strategy, and it looks eerily similar to Microsoft's approach in so many markets before: match all the functionality that other vendors are already offering, tie it to the company's ubiquitous desktop products, win a war of attrition, and, ultimately, sit back and count its money. It's the strategy that has taken Microsoft to where it is today, and who's to quibble with success?

The thing is, CRM is not like any other software category Microsoft has tackled. Operating systems, word processing, Web browsing, E-mail--all of these bread-and-butter Microsoft technologies were pretty straightforward, accepted tools by the time Microsoft swooped in with its brand of technology gentrification. It was just so simple--and logical--to switch from Mac to Windows, from WordPerfect to Word, from Netscape to Internet Explorer, from Notes to Outlook. But CRM is different. Not only has it proven to be a mind-numbingly difficult technology to get right, but companies also have invested millions in CRM deployments that they're not likely to abandon just because something else integrates with Outlook more easily.

That said, Microsoft's timing could prove to be fortuitous. Mostly because of Oracle's pending acquisition of Siebel, the market is in flux. There may not be a lot of companies looking to jump ship to another CRM vendor, but they could very well be more willing to listen now than at any time in the last few years--or, for that matter, the next few years. Wilson maintains that the Oracle-Siebel deal didn't cause Microsoft to accelerate its CRM effort to take advantage of the pause such mergers give to a certain percentage of IT execs--but he's not exactly downplaying The Oracle Effect either. "It has created a tremendous amount of interest around Microsoft CRM," he says. "A lot of people are reevaluating their CRM strategies."

That state of re-evaluation may represent Microsoft's best chance to grab a foothold in the CRM market. If it fails to do so, Bill Gates may be facing his nightmare scenario: conceding a software market to none other than Larry Ellison.