Microsoft Revs Its CRM Engine

Despite its underdog status in the crowded field of customer relationship management software, the new general manager of Microsoft's Dynamics CRM business is ready to take on market leaders, Oracle and SAP.

One year after Microsoft released its most significant upgrade of Dynamics CRM to date, the company is redoubling its efforts to gain share in the cut-throat competitive market of customer relationship management software.

Microsoft has reached outside its ranks to rev up its CRM business with the appointment of Dennis Michalis, the new general manager for Dynamics CRM, who replaced longtime GM Brad Wilson. Michalis comes to Microsoft after recent stints at Deloitte Consulting and Infor Global Solutions, where he was corporate senior VP and chief of staff. Ironically, his role in tapping Microsoft to bring .NET and Windows Azure to the Infor platform piqued Michalis' desire to join the Redmond team.

Dennis Michalis

Michalis in December officially took the reigns from Wilson, who recently left the company. As Michalis gets ready to meet with customers and partners at next month's annual Convergence 2012 conference in Houston, he is making the rounds this week to talk up his vision for stepping up Microsoft's footprint in the CRM market, where the company is currently an underdog.

Michalis' road show falls against the backdrop of Microsoft's planned release of the Q2 service update of Dynamics CRM, code-named R8, announced earlier this month and slated for release next quarter. The Q2 service update adds mobile support, including iPads, iPhones and Android devices, and allows users to access Dynamics CRM Online from browsers other than Internet Explorer (Chrome, Firefox and Safari).

The new release also adds improved support for social media by adding filters to activity feeds and offers industry-specific templates. The upgrade is also optimized for Microsoft's forthcoming release of SQL Server 2012, which will be the transactional engine of CRM Dynamics Online, Michalis said in an interview Monday at Microsoft's New York office. 

Microsoft's CRM push comes as its larger rivals --, Oracle and SAP -- are showing no signs of ceding share in the market and dozens of smaller players are taking aim, as well. Michalis is unmoved by the growth of Microsoft's larger rivals, particularly, which he claimed lacks the integration symmetry of the Dynamics CRM offering.

"Look at their acquisition pattern, the disparate platforms, the disparate code bases and their statement for complete integration, and I would challenge that," Michalis said of "I'd say that is a dangerous line to walk to lead both the partner ecosystem as well as a customer base who is expecting that line to be walked and towed very tightly. It's very expensive."

Michalis was no kinder in his assessment of Oracle or SAP. "When you say Oracle, I think of a trapped Siebel customer base," he said. "Lots and lots of Siebel deployments where I think you've got a lot of companies that are disappointed they couldn't get their users to use it. So the value hasn't been revealed."

That said, Michalis is not oblivious to Oracle's success in the market. "They're aggressive. They're a fighter. We don't hold our head in the sand about them being a non-issue at all," he said. "I would say they're right up there as a big, big concern. We've got plenty of wins against them, though, so we're kind of invigorated by recent patterns."

SAP, he argues, has given little emphasis to its CRM business, instead focusing on HANA, the company's in-memory database platform that provides real-time data analysis.

"I think they are trying to strike a chord and resonate to the market that says they are investing in a faster way to get to information," he said. "I sit back and just look at what we can provide from a SQL perspective and the speed and the investment that's going on there in Microsoft's world. To me, it's a non-issue. The enterprises of the world are going to get the same kind of speed out of everybody. They don't talk about CRM. I think they've got it, they've got a lot of shelfware. My sense more is CRM has been a sweetener for enterprise customers to take on more raw breadth of SAP, but I don't think the value has been realized."

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Yet for all the competitive rhetoric, Microsoft's CRM business pales in comparison to its three rivals, the vendors with more than $1 billion in revenues for CRM software and services, according to IDC. Microsoft's CRM business only clocked in $214 million in revenues in 2010. (IDC has not yet completed its 2011 CRM revenue report.)

Despite its underdog status, Michalis believes that enterprises are shifting to a more centralized view of CRM rather than the historic norm of more distributed deployments of different vendors' solutions. That, Michalis believes, bodes well for Microsoft, as the company tightly integrates Dynamics CRM with SQL Server, SharePoint and the rest of the Dynamics ERP suite.

"There are some big, big decisions being made, whereas before it may have been a peripheral thing to help sales force productivity," Michalis said. "Some of the largest companies in the world will still see pockets of traditional CRM flare up in departments and divisions because they need tools to run their business and they have the autonomy to do that, but you're seeing very substantial enterprise engagement now."

Indeed, enterprises are looking to reduce costs of their CRM deployments while gaining a more holistic view of their customer relationships, noted Mary Wardley, IDC's program manager for CRM and enterprise applications.

Consequently, with the release of Dynamics CRM 2011 last year and its model of offering cloud and premises parity, Microsoft appears to be gaining share, Wardley indicated in an e-mail. "The latest release of Microsoft Dynamics has moved Microsoft into improved competitive positioning within the CRM applications market particularly against's solution and the SaaS products from Oracle," Wardley noted. "Some customers switching from competitive products to Microsoft have experienced significant cost savings and are able to leverage their core internal Microsoft skills."

Microsoft's emphasis on giving customers the choice of deploying Dynamics CRM in the cloud, on premises or a combination of both is also resonating with customers. Since the release of Dynamics 2011 last year, some 60 percent of new deployments are online, said David Pennington, Microsoft's director of CRM product marketing. 

"There's a large portion of customers choosing to go online because of the clear benefits from operational budgets versus capital expense," Pennington said. "Because we have symmetry between our on-premise and online offerings, they feel that they want to consume this technology. For us, we don't mind. It's really just the choice of the customer, but we've seen a greater percentage choosing online."

Dynamics partner Armanino McKenna LLP, which this week said it has acquired Gateway Solutions to boost its CRM practice, is seeing 50 percent growth of its Dynamics CRM Online offering. Two years ago, Dynamics CRM Online accounted for 10 percent of its CRM business; now it's up to 60 percent, said Scott Mangelson, Armanino McKenna's CRM practice leader.

Overall, the partner's Dynamics CRM business is growing as well, Mangelson said in an interview. "There's a certain place where Microsoft fits well within the customer base and it's definitely growing," he said.

Despite that strong uptick in online deployments, which includes proof of concepts, there's a strong contingency of customers that are steadfast in their desire to run CRM Dynamics on premises, notably in vertical industries such as public sector and financial services.

"They want on premise," Michalis said. "Whether it be for control, security, their own strategic bets, the way they want to portray their infrastructure. That 40 percent is a pretty robust 40 percent."

But with the apparent shift to the cloud, Microsoft will move to a more frequent incremental upgrade cycle, Michalis said. "I don't think it ever will be the world that it used to be, in terms of wait three years for one big drop," he said, allowing for exceptions such as new releases of Office, Windows, SharePoint and SQL Server.

"Yes, there will be a future version of CRM, if you think about the on-premise deployment that is CRM Server 2013, or whatever the name ends up being, that is something that will happen," said Craig Dewar, director of product management for Dynamics CRM at Microsoft.

The next release update, code-named R9, will address such issues as improved social networking support and tighter integration with applications running in the Windows Azure Marketplace, according to Dewar. Microsoft is aiming to issue that next release later this year.



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