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Microsoft offers on-demand CRM on the cheap

Barney Beal, News Director

Microsoft today released pricing for the forthcoming Dynamics Live CRM, its on-demand CRM application, at a rate that could be good news for CRM buyers.

At its Worldwide Partner Conference being held this week in Denver, Microsoft said that it will offer multiple tiers for the on-demand or Software-as-a-Service (SaaS) application. The Enterprise Edition will be priced at $59 per user per month. The Professional Edition will be offered for $44 per user per month, though throughout 2008 Microsoft will offer it at a promotional price of $39 per user per month.

"These are our long-run prices," said Brad Wilson, general manager of Microsoft CRM. "We've been focusing on making CRM more affordable on-premise. We want to make it more affordable on-demand as well."

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San Francisco's Salesforce.com, by contrast, charges $65 per user per month for its Professional Edition and $125 per user per month for the Enterprise Edition.

The market for applications sold via the SaaS model has grown rapidly in recent years, led by CRM vendors -- Salesforce.com in particular. Just last month, NetSuite, a San Mateo, Calif.-based company that offers CRM, ERP and e-commerce on-demand, filed for an initial public offering. SaaS, with lower start-up costs and easy deployment, has helped to displace some of the spending on traditionally licensed software.

"At this price point, they make themselves pretty attractive," said Liz Herbert, analyst with Cambridge, Mass.-based Forrester Research. "For smaller companies, $65 to $125 and above are expensive. These will look more appealing. This is good news for all buyers."

While Microsoft will sell initially into new accounts, there may be some customers seeking to switch from competing vendors down the road, and at the very least, this announcement will give them leverage when they negotiate new contracts, Herbert said.

Early release program

Microsoft has already released the Live CRM application, code-named Titan, to more than 600 select partners through its technology adopters program. Later this quarter, it will offer early access to the application at no charge to select customers. Customers with five or more users can apply for the program through partners. After 2007, normal fees will apply. Microsoft did not specify how many customers will be selected, but "we expect we will have more demand than we can handle," Wilson said.

The Enterprise Edition will be made available in the first half of 2008. Both versions will offer service sales and marketing functionality, as well as configurability and up to 100 custom entities. Both will allow users to access the application through a browser or Outlook, and the Enterprise Edition will enable users to access CRM data through the offline Outlook client.

Microsoft Dynamics CRM Live will be operated and managed by Microsoft within its own data centers and will use the same code base as its on-premise application, allowing customers to move between the two deployment options or buy vertically specific versions through Microsoft partners.

"We really want to separate this idea of thinking of on-demand versus on-premise," Wilson said. "This gives our partners a chance to have different kinds of deployments."

Customers can run it in their own facility through Microsoft directly or through partners. In addition, he added, they can select the kind of client they use, be it a browser, Outlook or a portal.

Partners to get a bigger cut

Microsoft also said today that it will offer ongoing compensation to its partners. Competing SaaS vendors pay out a percentage of the contract revenue in just the first year, according to Wilson.

"We're going to pay an ongoing partner margin, 10% the first year, the second, as long as that partner is engaged with that customer," he said. "We don't want to have a one-and-done relationship with our partners and our customers. We want to be engaged for the long haul."

Microsoft also announced today that it is offering two industry-specific templates for Dynamics CRM 3.0, providing data models, workflow, user roles and screens for manufacturing and municipal government that will act as accelerators for customers and partners hoping to customize the application. Microsoft will post the XML code at no charge to customers and partners this month.

During the keynote address by Kevin Turner, Microsoft's chief operating officer, Wilson was also scheduled to give a demonstration of a marketplace where partners will be able to offer on-demand application that complements Microsoft CRM online. Salesforce.com offers a similar marketplace now with AppExchange.

"It's the right move, especially given the vast network of partners they have," Herbert said. "They're already in a good position because partners are already in the business of building technology add-ons, and they have strong relationships there. What they'll need to focus on is the online community."


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