Microsoft Takes Short-Sighted Approach to On-Demand CRM

Opinion: Microsoft's decision not to offer on-demand CRM is very much in character, but still short-sighted. It will have to reckon with the customer interest in on-demand business applications sooner than it thinks.

Microsofts views on on-demand line of business software became clearer Friday with its pronouncement that it will not introduce a hosted version of its brand-new CRM 3.0 package.

Whatever it may do with on-demand software in the future, offering hosted versions of major business applications isnt in the cards--at least in the near term.

The on-demand Web services that Microsoft announced this week, Windows Live, and Office Live, are essentially add-on information, collaboration and communication services for individuals or small and midsize companies, not enterprise line-of-business applications.

On Thursday, Microsoft announced the acquisition of a file-synchronization technology vendor, FolderShare, a subsidiary of ByteTaxi Inc.

FolderShare provides an online service that allows users to synchronize data from multiple computers that they access through a Web browser. This is likely a service that Microsoft will add to Windows Live.

But none of this looks like the start of a large-scale effort to offer on-demand business application services.

There had been much speculation that Microsoft would inaugurate its move into on-demand software distribution with the introduction of CRM 3.0, which was released to manufacturing Monday.

/zimages/7/28571.gifClick here to read about Microsofts "Live" Internet services.

It seemed like a natural move for a company that might want to diversify its product distribution options by offering a hosted version of a major application such as customer relationship management.

Some of its biggest CRM competitors, Siebel Systems Inc., and NetSuite Inc., among others, are demonstrating that there is money to be made from by offering on-demand CRM applications.

The time seemed ripe for Microsoft to adopt this business model in a serious way before these smaller competitors had a chance to get too much bigger and start significantly cutting into Microsofts sales of on-premise software.

Brad Wilson, Microsofts general manager of CRM, succinctly explained why the company wont make this otherwise obvious move: "We dont need to play somebody elses game."

On the face of it, this seems like a sensible position. Microsoft has become one of the richest and most successful companies on the planet by selling on-premise licenses for operating systems, servers and business applications.

Next Page: Sitting on the sidelines.

John Pallatto

John Pallatto

John Pallatto has been editor in chief of QuinStreet Inc.'s since October 2012. He has more than 40 years of experience as a professional journalist working at a daily newspaper and...