Microsoft shifts to application platform, adds 1 millionth CRM user

As it expands and draws more CRM users, Microsoft, like Salesforce.com, is emphasizing its capabilities as an application platform, not just a CRM provider.

Microsoft now counts 1 million users running its Microsoft Dynamics CRM application.

However, the path to its next million customers will come via xRM, the platform that the CRM application is built upon, allowing customers and partners to develop their own applications, according to executives.

Microsoft released the news at its Worldwide Partner Conference being held this week in New Orleans.

"Our path to the first million has really been sales, service and marketing," said Bill Patterson, group product manager for Microsoft Dynamics CRM, evoking the core competency of CRM software. "Our path to the next million is broadening the people who use Dynamics CRM within a particular line of business function. xRM is really enabling us to build applications that run on the CRM capability but not deploying it in the sales, service and marketing lines of business."

For example, organizations like the Pennsylvania Office of the Attorney General are adapting the relationship management functions for their own needs, Patterson noted. The AG's office has built out 12 applications with xRM, including Citizen Service Help Desk and Coroner Management.

"xRM really becomes that way to build line of business applications rather than starting from a raw Java or .NET project," Patterson said. "With Microsoft, our strength is selling in the platforms -- operating systems, databases, email and collaborative software. With xRM, we're making it the next piece of IT infrastructure, managing business systems and business relationships."

For more on Microsoft's application platform ambitions
Learn how some companies are using Salesforce.com and Microsoft as application platforms

See a short demo of Microsoft CRM

To that end, partners and sales reps that sell Microsoft's SQL Server database will now be selling xRM as well.

It's a similar tack to the one taken by Salesforce.com, which is promoting its Force.com platform as a way for its own customers and partners to build out their own on-demand applications.

Microsoft began highlighting xRM at its Convergence Conference earlier this year.

"It's nothing new, they're formalizing xRM. What they're really trying to do is broaden potential markets for the CRM engine," said Chris Fletcher, research director with Boston-based AMR Research. "They're clearly trying to position xRM as a broad application development environment and trying to tie into more partners and other groups."

But as Microsoft and Salesforce.com shift their strategies toward becoming application platform vendors versus CRM vendors, do CRM users need to be concerned that innovation on the core CRM functions will fall behind?

"I don't think users will be concerned as much as the companies need to be careful about delineating the two clearly," Fletcher said. "I'm seeing Microsoft having trouble differentiating xRM already."

For example, a partner that wants to build out functionality on the xRM platform gets the Dynamics CRM product and must strip out the CRM functions, Fletcher said.

Microsoft adds Twitter social networks feed

One way Microsoft is expanding its CRM offerings is via its CRM accelerators, packaged extensions to Dynamics CRM available free to existing customers.

The latest of the accelerators is the Social Networking Accelerator, which allows businesses to monitor customer conversations on social networking sites and provide real-time status updates. While a number of vendors, including Salesforce.com and RightNow, have released integration into social networks, including integrating Twitter into customer service, Microsoft's Accelerators offer sentiment analysis and a networking engine, allowing users to integrate things like service cases built around a Tweet into the Dynamics CRM workflow. The Social Networking Accelerator for Twitter will be available later this week, and other social networks will be introduced at a later date. A Partner Relationship Accelerator and Portal Integration Accelerator are also forthcoming.

Salesforce.com and Microsoft CRM by the numbers

While Microsoft may have reached 1 million users, it is not alone at the top.

"One million users is certainly significant, although they've gotten here relatively slowly and methodically," Fletcher said.

By way of contrast, Salesforce.com reached 1 million users in December 2007.

"It took us seven years to reach the first 500,000 paying subscribers and only another 16 months to reach the second 500,000," CEO Marc Benioff said in a press release at the time.

Those users came from roughly 59,300 customers, according to Salesforce.com. Microsoft currently has more than 20,000 customers, an average roughly 50 users per customer, Patterson said, noting that recent deals have seen larger deployments.

In addition, Salesforce.com, partners and customers had created 750 applications on the AppExchange, its online repository of applications. Microsoft currently has 1,000 applications built on xRM, Patterson said.

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