23-Mar-02
Microsoft "Validates" CRM for SMBs

Microsoft turns another group of "partners" into victims as it enters the Customer Relationship Management software market.

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Customer Relationship Management, or CRM as it is known, is the hot buzzword in today's software market, and just too tempting for Microsoft to pass up, so Microsoft CRM was announced early in March 2002. The product will be sold integrated with Microsoft Great Plains accounting and as a stand-alone product. The target market is the SMB (Small, Medium Business), particularly the high end of Small, and the low to mid section of Medium.

Tim Fargo of Interact Commerce, which sells Sales Logix CRM software into that market commented, "We feel Microsoft's move into the market validates the strategy of delivering integrated front-office / back-office applications to small and midsize business". Onyx Software stated ". . Microsoft's announcement does represent validation of the overall CRM industry and the market opportunity it represents across all segments". Other CRM software publishers also stated that Microsoft's move was not a threat to their business.

About a week later, Microsoft announced that Microsoft CRM would be fully integrated with Microsoft Outlook and with Microsoft Exchange Server, as well as with .NET.

Among those currently affected by Microsoft's CRM initiative are: Symantec (Act!), FrontRange Solutions (GoldMine), MultiActive (Maximizer) and Interact Commerce (Sales Logix). Future targets will be Pivitol, Siebel, Onyx and others that cater to the high range of Medium Business. PeopleSoft, SAP and other Big Business CRM vendors are not affected in the near term, but their plans to expand downward into Medium Business are.

Analysis

Microsoft promised it's software development "partners" it would never compete with them in the field of business management software, and a whole lot of software developers believed them, developed only for Windows, and ridiculed any competing environment.

Two years ago, I predicted Microsoft would purchase Great Plains, issue a low-end version of Great Plains accounting, and begin driving all other accounting software vendors out of the Windows software market. This has all come to pass, with Great Plains purchased a year ago and the low end package announced about six months later. Microsoft Great Plains' announced earnings targets require the demise of the rest of the industry.

It is only natural for Microsoft to expand from this Great Plains Accounting power base to push other "partners" out of their markets. As I have said so often, "A Microsoft partner is a victim they haven't gotten to yet".

How can Microsoft pry well established vendors out of a market it is new to, and in which it's products are immature? The same way they destroyed the total dominance of Lotus and WordPerfect during the transition from DOS to Windows.

Great Plains is integrated with Microsoft's .NET development team and will be a good 6 months to a year ahead of any other software vendor. Microsoft CRM will be integrated with other Microsoft products (see above) and competing products will keep having mysterious compatibility and stability problems, just as WordPerfect did, until customers give up on them.

At the high end, Microsoft is limited by the poor performance and scalability of Intel based servers, Windows 2000 Server and Microsoft SQL Server (Microsoft products will run only on Windows and Windows only runs on Intel). As this platform edges into higher territory, Microsoft Great Plains and Microsoft CRM will follow.

Oh, that word, "Validates" (and it's sister "Legitimizes"), used by Onyx and Interact - it has a time honored meaning in the technology business: "A giant has just moved into our market and we are toast". "Validation" and "Legitimization" are a leading cause of the demise of technology pioneers.

What's next? I'd say Service and Support software, which is related to CRM. FrontRanges's Heat and similar packages from other vendors look to me like a prime target. SCM (Supply Chain Management) shouldn't be far behind.

Recommendations

If you intend for your business to stay within the Microsoft environment, I'd look at planning your eventual move to .NET and Great Plains. You will inevitably end up with an "All Microsoft" environment. The downside is Microsoft will have complete control over your business and how you do business. Inevitably, your costs for their products (and supporting their products) will continue to rise - that's just the way monopolies operate.

The end objective of Microsoft's .NET Initiative is for you to lease all your software from Microsoft and store all your business data on Microsoft .NET servers. You will have access to your business records only so long as you make your software lease payments (local copies will not be usable). You will "upgrade" your computer systems when Microsoft tells you to. Eventually you will lease your computers from Microsoft as well, but that's still quite far in the future.

If this future does not please you, or fit with your business plan, I recommend you start right now planning your move away from Windows. The first step would be to migrate to a Linux based accounting package like Vigilant or Appgen (you can still use your Windows workstations with it). You can then start preparing a migration to Linux workstations at some point in the future. The Linux desktop environment is maturing rapidly now.

- Andrew Grygus

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