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For a company that vowed it would remain firmly ensconced in the mid-market—until at least 2009—Microsofts March 14 announcement that it has added thousands of enterprise customer relationship management seats to its roster raises some questions.
Namely, is Microsoft gearing the next generation of its business software, Dynamics, for the enterprise market?
And if so, whats necessary for the IT giant to sell up-market, besting the likes of SAP AG and Oracle, the worlds largest and second largest software vendors?
Microsoft announced that since it was released in December, Dynamics CRM 3.0 has been deployed by “a broad range of enterprise-scale businesses, many of which comprise thousands of users,” according to the press release, which names H&R Block Inc. (deploying 1,500 seats), AGFirst Farm Credit Bank (deploying 1,500 seats), and Maccabi Healthcare Services (deploying 1,200 seats) as prime examples of its prowess in corporations.
Analysts have long said that for Microsoft to sell to the enterprise market, it needs, first and foremost, an internal sales and support team.
Currently, Microsoft sells its mid-market ERP (enterprise resource planning) software through a massive reseller channel.
“Microsoft cant go head-to-head at the top end of the market with SAP and Oracle if they dont have direct sales, as those companies do,” said Joshua Greenbaum, principal of Enterprise Applications Consulting in Berkeley, Calif.
“Also, they cant attack high end global sales if they dont have global implementation and support. Right now theyre lacking.”
At the same time, according to Greenbaum, Microsoft has not attracted the attention of the big system integrators—the very same group that pulled SAP and Oracle into the enterprise spotlight.
But what Microsoft does have is Office—arguably the most ubiquitous desktop software in any organization.
And CRM 3.0, with its integration to Office, is a great entree into those corporate accounts.
“Microsoft is indeed serious about changing the perception of being a mid-market provider,” said Robert Bois, an analyst with AMR Research, in Boston.
“CRM, in particular, tends to be deployed very departmentally within large enterprises, so its an application that can sell virally within a larger organization.”
Boise points out that even the large ERP vendors such as SAP have conceded that Microsoft owns the desktops of professionals—”and they all need to integrate to Outlook and Office if they want to drive user adoption,” he said.
The sticking point, if one is splitting hairs, is Microsofts pronouncements in 2004, during the U.S. Department of Justices trail to stop Oracles acquisition of PeopleSoft. Doug Burgum, then head of Microsoft Business Solutions, testified that the company had no plans to enter the enterprise market—for at least the next five years. Thats three years and counting from now.
At the time, Microsoft had spent the previous three years, and more than $2 billion, acquiring ERP companies Great Plains, Solomon, Navision and Axapta (the code base of all four suites will be brought together with CRM, sometime around 2008, to form the Dynamics suite).
And it set some serious goals for its underdog MBS division, which was aligned under the Information Worker group earlier this year.
Microsoft has said it plans to grown MBS to $10 billion in annual revenue by 2010—quite a goal given SAP booked $10.23 billion in overall revenues last year, and $3.34 in license revenue. In comparison, MBS earned $803 million in license revenue during the same time frame.
That could change should Microsoft Dynamics attract more enterprise customers—and the big SIs.
What Microsoft needs to do, according to AMRs Bois, is show a “sustained commitment to the Dynamics suite both in R&D and sales and marketing dollars,” he said.
“Thus far, the branding effort the company has put into Dynamics would indicate it wont be backing down on enterprise applications any time soon.”
Greenbaum agrees that Microsoft is being a little less obtuse in its intentions.
“Theyve been schizophrenic about it, but fundamentally Microsoft wants to be in the enterprise,” said Greenbaum.
“And CRM is a wedge product. Theyre going right after the SAP customer base.”