Microsoft CRM Online: How will it compete?

I think Microsoft's launching of CRM Online was a savvy but predictable move for the software giant, and it's a move that is not limited to Microsoft. Oracle, SAP, SugarCRM and others are going in the same direction. To be specific, the direction is toward a product line that provides customers with the flexibility to use on-demand delivery modes or to host their own, just as they've always done. In practice, it partially blunts the effective benefit of on-demand, if the only benefit you see is in the delivery model. On the flip side, this is an interesting half-way point between real on-demand and conventional application use and it is something that many companies will like if they are constrained to keep their data in-house.

If the rollout simply gives customers a choice of where their applications live, everybody wins, but I don't think that's what is happening. The online, on-premise approach is really an attempt to straddle two paradigms in an effort to protect the business model of delivering software in a box. Microsoft is very up front about it when it says that CRM Online is the same code running in either environment. That seemingly innocuous statement is loaded with problems down the road.

For example, it enables vendors to provide single or multi-tenant CRM solutions, which means that rather than having a single code base with a single running image and a one-time update process, which is common with multi-tenant, the hosting provider will run many images of the software. The result is one of the things that has been difficult about conventional software. Multiple versions mean much more investment in keeping it all working with the consequence that there is less in the budget for innovation or that the budget remains artificially high compared to the multi-tenant approach.

At the end of the day, this "whatever" approach means nothing changes in the industry. CRM software remains more expensive than it has to be because it is based on the idiosyncrasies of customized implementations which limit its accessibility to people and organizations that can better afford it. In the last forty years technology has gone from a "gee-wiz" phenomenon to a commodity, something you must have in an increasingly competitive global marketplace. Multi-tenant is a great way to share the wealth, and single tenant slows down innovation for the benefit of a relatively few large vendors that need to preserve their business models.