Microsoft Looks to Undercut CRM Rivals on Pricing

Microsofts pricing for its Dynamics Live CRM is undercutting the competition by about half, and partner compensation for on-demand sales is about 20 percent less than it is for annual subscription rates.

The software giant announced the long-awaited product and pricing information for its on-demand customer relationship management offering at its annual Worldwide Partner Conference July 10 in Denver.

But now that its out, the information raises a number of questions, including whether its pricing tactics are enough to take on the SAAS (software as a service) market and its dominant seller, Salesforce.com—or even whether it can make a wave in what is quickly becoming a very large pool of vendors?

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Officials with Microsoft, located in Redmond, Wash., said they will offer the Professional version of their Live CRM on-demand service to customers for $44 per user per month, though for all of 2008—when the product is actually available—Microsoft will offer an introductory price of $39 per user per month for the pro version, which offers a full suite of CRM software through Microsoft Outlook and browser clients and customizable workflow through Microsoft Workflow Foundation.

The Live CRM Enterprise edition, which offers all the capabilities of the Professional version as well as offline data synchronization, will be available for $59 per user per month.

Salesforce.com, the gold standard for on demand CRM and the company that Microsoft is working to beat, offers its Professional and Enterprise CRM editions for $65 and $125 per user per month, respectively. The San Francisco company also has a Group Edition that is $10 per user per month.

Salesforce.com CEO Marc Benioff said in an e-mail to eWEEK that Microsofts pricing wont make up for an inferior product.

"These new prices are their market prices today—there is no difference," Benioff said. "When you have an inferior product you have to have an inferior price. That is why Zune is priced below iPod, and why Windows CE is priced below Blackberry, and why Microsoft CRM is priced below Salesforce.com. Microsoft CRM still lacks many of the key features customers demand today, which is why Gartner ranks them below both Salesforce and Siebel on the 2007 Magic Quadrant out last week."

Salesforce.com offers four separate editions of its software: Unlimited, Enterprise, Professional and Group. Unlimited offers pretty much what it says: unlimited access to Salesforc.coms CRM software for sales, service and marketing; customization capabilities; access to AppExchange Salesforce.coms on-demand application marketplace; Salesforce.coms sandbox environment for testing software; access to mobile capabilities; unlimited custom apps, tabs and objects; premier support; more storage; and workflow capabilities. The rest of the editions have some of the Unlimited editions features, but not all, and with a little bit less offered at each descending price point.

Salesforce.coms Enterprise Edition is the only version outside of Unlimited to offer workflow capabilities and offline access.

Greg Gianforte, CEO and founder of RightNow Technologies in Bozeman, Mont., said buyers should look closely at what they are getting for the list price and what add-ons are needed to get a solution that meets their companys needs.

"The Microsoft offering is based on its packaged CRM app, which is a traditional B2B CRM app, with an SFA [sales force automation] contact-records focus, so its likely that their initial targets are SMBs, and the pricing will be attractive to that market," Gianforte said.

"RightNow has taken a different approach in terms of product offerings," he continued. "Were focused on larger global enterprises that are consumer-centric [rather than B2B] and want a CRM solution for multi-channel customer interactions, and were focused on offering vertical solutions that further accelerate the benefits to our customers. RightNow pricing begins at $100 per user per month for a one-year subscription, and we typically dont lose deals because of price."

Gianforte also pointed out that Microsoft and its partners have to make a significant shift to selling, customizing, servicing and hosting applications. "RightNow has offered on-demand solutions for a decade," he said. "You dont just flip a switch and shift from packaged applications to hosted offerings."

Next Page: The on-demand model is here to stay.