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Is Microsoft Serious About Software as a Service?

I just attended the Microsoft Worldwide Partner Conference in Denver. I enjoy these conferences for their content and also find them great for catching up with friends and colleagues I only see at conferences like this one. The most interesting topic for this conference was clearly software-as-a-service. The overwhelming buzz during the conference was the apparent bipolar view of SaaS by the channel and my most significant takeaway from the conference was how under-empowered Microsoft's SaaS CRM software solution really is.

Hosted CRM software clearly threatens the more traditional CRM software licensing (on-premise) model. Like an ostrich putting its head in the sand, Microsoft and most of its business partners first ostracized and then clearly ignored the on-demand CRM and ERP movement (a common and usually ill-fated strategy for Microsoft). Well, after losing considerable small and midsize market (SMB) market share to and walking on eggshells with its channel, Microsoft has used this conference to hit SaaS head on. Seemingly.

The majority of the Microsoft channel has not exactly embraced hosted software; far from it. From a software sales perspective (which is the perspective that drives many Microsoft partner business models), hosted software provides a long-term financial return that is viewed as pennies on the dollar when compared to the high margin short term, cash generated from traditional on-premise software sales. However, as most value added resellers (VARs) have ultimately figured out, hosted software is now being demanded by sales prospects and trying to pitch on-premise software when the prospect wants a subscription-based, hosted, thin-client on-demand solution is only going to result in lost sales opportunities. The product delivery decision equation has moved from selling on-premise versus hosted to selling hosted or losing out on a hyper-growth market (in which case its the VAR that often suffers the customer erosion to this unstoppable movement). While several VARs that I spoke to continue to fight SaaS, most have recognized that if you can't beat them, it's time to join them.

Microsoft's CRM software approach is all about Dynamics CRM Live (code name Titan). Microsoft claims to have found SaaS religion and at first blush, this multi-tenant, semi thin-client CRM system is the thunder behind Microsoft's SaaS adoption. However, after viewing the yet to be released product, I was clearly convinced that this is either a very low-end solution targeted at ACT!, GoldMine and the low-end contact management market or a poorly advised tactical defensive strategy to somehow appease the business partner community and hold off the perceived cannibalization of the higher end Dynamics CRM on-premise solution. Or possibly this is a rushed to market solution and like most Microsoft products they'll get it right on the fourth version release. Will the hosted Microsoft product be successful? Microsoft and its colleagues will certainly say yes, however, I suspect the market will largely say no. I do believe Titan will successfully compete in the low-end of the SMB market and maybe take away some deals from arch rival's Group Edition (formerly called Team Edition) - and while there will be a few press releases citing large user count customer acquisitions, I predict these will represent less than one percent of the target market buying Titan. The other 99 percent will be the lower-end of the SMB market.

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July 30, 2007 in Microsoft, SaaS | Permalink | Comments (0) | TrackBack (0)
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