Microsoft Targets On-Demand CRM

About 300 partners are participating in a test program of the "Titan" customer relationship management release.

Microsoft officials are hoping a test program of an early version of their next major customer relationship management release—code-named Titan—will ease partner concerns over the upcoming on-demand version of Dynamics CRM.

The Redmond, Wash., software company announced Jan. 10 that about 300 partners are participating in the program to test early versions of Dynamics CRM 4.0.

Titan, expected this summer, has two major attributes that bring it into the realm of SAAS (software as a service), or on-demand software: multitenancy capabilities (a shared infrastructure for all users) and a single code base across on-premises and on-demand versions. While both attributes enable partners to lower their development and infrastructure costs—and pass those savings on to customers—they also change a partners revenue stream from one of annual license fees to one involving monthly fees. That shift has led to many questions for partners.

"The biggest change [for partners] is that CRM becomes a multitenant, hostable application," said Rob Boise, an analyst with AMR Research. "The early fears were that Microsoft was going to host [Titan] themselves and that most on-demand applications tend to be sold direct, rather than indirect," cutting partners out of the equation.

Partners have access to Titan code through Microsofts TAP (Technology Adoption Program). The idea is that with an initial peek at the on-demand code, partners will develop a fuller understanding of the on-demand model to determine how it will jibe with their business model. Brad Wilson, general manager of Dynamics CRM at Microsoft, said the 300 partners now using Titan are building mashups, vertical solutions and plug-ins. More than 1,000 partners will have access to Titan by the second quarter.

"There are two models today: on-premise and SAAS [through partners]. With Titan, there is on-premise, SAAS through partners and SAAS directly run by Microsoft," Wilson said. "Partners are exposed to all three models [through TAP], and they can decide how it maps to their model."

At Microsofts PartnerWorld conference last summer in Boston, when Titan was announced, conversation centered on how the products introduction would affect partners. "Right now, Microsoft partners are judged on how many licenses they sell. With on demand, that goes away," said Mike Mazur, vice president of channel sales and alliances at NaviSite, a Microsoft partner, in an interview at the conference.

With NaviSite now part of the Titan TAP program, Mazur said Microsoft has done a lot of work to educate partners. "Theyve been going out of their way to make sure their partners have been enabled to do the higher-end CRM packages," said Mazur, in Chicago.

Microsofts Wilson said he is coaching partners to look at SAAS as a way to deliver a service. However, partners should understand how to participate, Wilson said. "It takes time to build an on-demand service or plug into it," he said.

There is still the issue of pricing, which Microsoft is working on. Currently, Microsoft charges partners an upfront fee to resell its software but hasnt determined what to charge for on-demand usage. "You cant charge [partners] for upfront licenses and have partners sell on a monthly basis. It would take years for partners to recoup [their investment]," said AMRs Bois. "My guess is Microsoft will sell [to partners] on a monthly basis."

During last years Partner-World conference, Herve Pluche, then acting president and CEO of Neocase Software, said pricing for Titan was key. Six months later and now part of the TAP group working with Titan, Tamera Scholz, vice president of professional services at Neocase, in San Francisco, said that because her company already has an on-demand model, pricing for Titan shouldnt be an issue. "For on-demand pricing to stay competitive and be in line with our current on-demand [pricing], Microsofts pricing would have to be a monthly subscription," Scholz said.