Microsoft Prices CRM Online to Undercut Rivals

By John Pallatto  |  Posted 2008-04-22

Microsoft Prices CRM Online to Undercut Rivals

Playing catch-up in the on-demand customer relationship management market, Microsoft announced the general availability of Microsoft Dynamics CRM Online with aggressive pricing and data storage options that seek to take business away from

Dynamics CRM Online is a full suite of on-demand sales, marketing and customer service applications along with business process automation and workflow automation, said Bill Patterson, Microsoft's director of product management for the online CRM package.

To try to entice customers to switch to Dynamics CRM Online, Microsoft is undercutting's prices and offering more data storage capacity.

Microsoft is offering its on-demand CRM package in two editions. The Professional Edition offers 5GB of data storage, 100 configurable workflows and 100 custom entities at an introductory price of $39 per user per month through the end of 2008. The regular price after that is $44 per user per month. More details on pricing and options are available at Microsoft's Dynamics CRM Online Web site.

The Professional Plus Edition provides offline data synchronization along with 20GB of data storage, 200 configurable entities and 100 custom entities. This package is priced at $59 per user per month.

Oracle announces the next version of its CRM On Demand software. Click here to read more.

In contrast,'s Professional Edition costs $65 per user per month and provides 1GB of storage.

More than 500 organizations have been using the product for nearly eight months as part of an early release program, Patterson said.

"For some of these businesses this is their first CRM system; for others, they are replacing other CRM investments such as" and Oracle's Siebel CRM On Demand package, Patterson said. Interest in the Microsoft product isn't limited to small and midsize businesses, he said, but departments and divisions within large enterprises are also showing an interest.

Patterson said the average deployment size is about 15 seats per customer but some of the larger sales in the pipeline are averaging about 27 seats per customer.

Microsoft has also been working with about 300 VARs on the product introduction and about 150 ISVs that are building industry vertical applications that run on top of CRM Online or software that integrates CRM Online with other applications.

CRM Vanilla and Familiar


With the aggressive pricing and storage options, Microsoft has ensured that companies will at least take a long, close look at Dynamics CRM Online. said Laurie McCabe, vice president with market research firm Access Markets International Partners.

Microsoft's offering could prove to be a strong competitor to and other on-demand CRM products, she said. "It is very well integrated with Outlook and many people are comfortable with Outlook," so it wouldn't be that hard for companies to shift to the product, McCabe said.

"I think it will come down to 'how well it does the job for me.' I don't expect it to just suddenly turn the tide in the CRM market," she said, adding that "Salesforce has become the on-demand gold standard" in the market and it would not be quick and easy to knock it from that position.

The fact remains that Microsoft "can pour a lot of money into marketing it" and with those resources behind the product, it should do well in the market, McCabe said.

Microsoft is also making use of its partner channel, "and that can be extremely valuable. We don't want to underestimate that," she said. Furthermore Microsoft is offering to pay 10 percent of the sale up front and will continue to pay that percentage for as long as the customer keeps working with Dynamics CRM Online, McCabe said, while other online CRM providers will only pay that fee for the first year of service.

"It is not bad for partners that are already comfortable and familiar" with the Microsoft channel, she said.

The general release of Dynamics CRM Online will likely help speed up the acceptance and use of both the on-premises edition of Dynamics CRM and the online version, wrote Rob Bois, an analyst with AMR Research, in an e-mail to eWEEK.

"While Microsoft is obviously newer to the SAAS [software as a service] game, the company made a big push to engineer the Dynamics CRM 4.0 release with a multitenancy architecture that partners have already been using to host CRM for customers," Bois said.

"It's built on the exact same data model and business logic as the established on-premises product, and we see SAAS as the clear preferred delivery model for CRM today, so I expect this combination will do nothing but accelerate growth of Dynamics CRM," he wrote.

There will be customers that prefer to buy the online version of Dynamics CRM rather than the on-premises edition that Microsoft has sold for years, Bois noted.

"The real question is whether they will now prefer to do business directly with Microsoft rather than a partner. I think the Microsoft-hosted option will have broad appeal," Bois wrote. "As a customer, I would be more inclined to want to use a big trusted provider like Microsoft rather than a local reseller with a third-party hosting facility, especially if I'm looking for straight vanilla CRM," he wrote.

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