Microsoft has a lock on desktop business software with its collection of Office applications, which controls more than 90 percent of the market. Office accounts for more than a third of Microsoft's overall revenue. But the desktop application market is starting to mature, meaning Microsoft is looking for new areas of growth. And CRM is one of the few growth areas in the business software market. A recent survey of chief information officers by Deutsche Banc Alex Brown found that spending on CRM is one of the top priorities for companies in 2002. Market researcher IDC expects the worldwide market for CRM software to reach $14bn (£9.8bn) in revenue by 2005. That's caused Microsoft to re-examine an entry into business software and its strategy for Great Plains. However conservative Microsoft's current aims are, the software giant appears to be girding for a fight. In the first year of the Great Plains acquisition, Microsoft took a hands-off approach toward the company. Now, as Great Plains begins to integrate the software giant's .Net technologies into its products, the line between the two has blurred. "The question is, Where does Great Plains stop and Microsoft begin?" Enterprise Applications Consulting analyst Joshua Greenbaum said. Microsoft has some business application functions already in place across its software and Web businesses. Microsoft's bCentral Web site, which dishes out applications over the Web to small businesses for a fee, already has some basic customer relationship technology built into its menu of software. In addition, Great Plains already has a deal to resell a version of Siebel's Front Office package of software tailored for midsized companies of up to 500 employees, with tools for sales, customer service and marketing, among other applications. But a new set of CRM software from Microsoft could put the software giant squarely in the crosshairs of CRM leaders. A product code-named Gulf Coast is under development at Great Plains. Gulf Coast will include a new release of Great Plains' existing software along with a high-end product called E-Enterprise, part of the company's thrust into larger companies of 500 to 5,000 computer users. That upgrade includes more sophisticated CRM technology, according to Stockstad. Microsoft also has a little-promoted "solutions" business that includes some Web-based CRM options. Its business applications focus feeds into Microsoft's larger Web services and ".Net" ambitions. The result of that, the ".Net Business Framework", is scheduled for release in the fourth quarter of this year alongside a new front-end Web portal-based application called the Business Desk, which will be able to render all Great Plains applications in a Web browser, according to company executives. Microsoft's .Net is an overarching effort to connect all of its online properties and products together using a common set of Internet technologies and Microsoft software. It also will serve as the basis for the company's software-as-a-service push, with Microsoft collecting subscription fees rather than licensing revenue for usage of packages such as Office. Leading up to the .Net integration, Great Plains will also release upgrades to its current Windows-based products, including a new version of its Dynamics and Solomon software by midyear and a second version of its Small Business Manager package by fall 2002. In the next year, the company also plans to generally focus on small businesses and, in particular, the integration of Microsoft's Office into Small Business Manager, Stockstad said. No worries - yet
Analysts view Microsoft's entry, at least initially, as little more than a nuisance for larger players like SAP or Oracle, believing Microsoft would settle for the low end of the market where it has more expertise. "None of the big four or five CRM companies should be worried at all," Greenbaum said, noting Microsoft's inexperience at tackling the business process problems at large companies. Microsoft's history shows it has had mixed success in entering new markets, such as set-top box software or media operations like Sidewalk. But it has been hugely successful in coming from behind to capture the Web browser market; the database software business, where it continues to gain market share on rivals such as IBM and Oracle; and the server operating system business, where it has rapidly replaced old stalwarts such as Novell. One company seemingly untroubled by Microsoft's plans is SAP, which sells enterprise resource planning and CRM software primarily to large companies. The company has increased its efforts to target smaller companies in recent years, however. "They're masters at marketing at the low end," Allen Brault, senior vice president for small and medium-sized businesses at SAP America, said of Microsoft. "But this is a whole different ballgame. This is about how they're going to service the customer. This is something Microsoft historically is not built to do. They've typically relied on partners for that." Other CRM makers are keeping a close eye on Microsoft. "They're addressing simpler businesses," said Les Wyatt, chief marketing officer at JD Edwards. "That said, we continue to watch (Great Plains) very closely." As well it should, analysts said. Whenever the world's largest software maker throws its weight into a new area, that's cause for alarm. "You have to think of Microsoft as the beast that swallows everything in its path. It must continue eating," Rosoff said.
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