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Microsoft Dynamics CRM 2013 Independent Software Review

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Despite being a late entrant to the cloud CRM software market, Microsoft has acquired more CRM customers than any other vendor in its limited period and is using its momentum to alter the market in terms of platform capabilities, ubiquitous software delivery and subscription pricing.

According to Gartner, as of 2013, Microsoft was the #4 CRM software player (behind Salesforce.com, SAP and Oracle) with 6.3% market share and an estimated $1.1 billion in annual sales. Most analysts believe Microsoft CRM is growing faster than SAP and Oracle, but not as fast as Salesforce.com.

Nonetheless, the Dynamics CRM trajectory is impressive. By 2009 Microsoft Dynamics amassed over 1 million users in just over six years; an accomplishment that took top rival Salesforce.com eight years to achieve. At the April 2011 Microsoft Convergence conference, the company announced it has over 350,000 Dynamics customers (mostly ERP), more than 5 million users and just over 27,000 CRM customers making up 1.4 million users. One year later at the March 2012 Microsoft Convergence conference the company announced that Dynamics CRM and Dynamics CRM Online grew to 33,000 customers. Most recently, in July 2013 at the Worldwide Partner Conference, Microsoft announced it was up to almost 40,000 customers and 3.5M users.

Microsoft CRM is still a minority when viewed among the entire Dynamics family which also includes four Enterprise Resource Planning (ERP) systems. However, while Dynamics ERP products are experiencing a stagnant or even downward trend, the CRM solution is showing aggressive growth.

Cloud Strategy
Microsoft's biggest strategy shift in the last four years has been toward the cloud. The software giant found cloud religion a bit late, but is now devoting about 90 percent of the R&D budget, or about $8.6 billion to cloud R&D projects.

Microsoft's application strategy is to deliver a complete CRM suite with accompanying platform support in a variety of delivery models (cloud, partner hosted or on-premise) and at an aggressive price point. For software-as-a-service (SaaS) CRM, Microsoft has raised the bar by lowering subscription pricing and backing on-demand software delivery with solid Service Level Agreements (SLAs) complete with financial guarantees.

The company is clearly on its way to achieving its strategy, but seemingly likes to take the long way. Even with all its resources and might, the company's innovation in the CRM industry is not impressive. The company lags much smaller competitors in key areas such as social CRM, mobile CRM, marketing automation, platform as a service (PaaS) and analytics. While the Dynamics CRM 2013 release is a serious step up and a competitive product, it's likely that competitors will continue to out-innovate Microsoft leaving the software giant a follower in many CRM growth areas.

Or perhaps Microsoft will find the will to lead. Microsoft discovers its best innovation when seriously threatened. Think back to Netscape or Linux or the current threat from Google. Now consider CRM threats from cloud leaders such as Salesforce.com and open source pioneers such as SugarCRM. When seriously threatened, Microsoft shows the ability to rally the troops around a clear vision and come out on top. The company now shows that type of motivation for the cloud—primarily with Azure, a cloud infrastructure (IaaS) and platform as a service (PaaS) used to deliver scalable compute, storage and hosting of web applications from Microsoft data centers. Whether the company's traction in the cloud will carry over to CRM solutions and market share growth remains to be seen.

CRM Software Execution
Microsoft is a creature of habit so to understand how Dynamics CRM will evolve it's helpful to understand Microsoft's history. Dynamics CRM progress was initially thwarted or at least delayed by both executive turnover and extremely short sighted strategies toward the cloud movement. Dynamics leadership incurred a revolving door of top managers. From Doug Burgum (the former CEO of Great Plains which kicked off Microsoft's entry to business applications), to Satya Nadella, to Tami Reller (another Great Plains executive) to Jeff Raikes, to Kirill Tatarinov, the lack of continuity in senior management took a toll on early business execution.

Similarly, Microsoft initially played a defensive role toward the undeniable SaaS movement for far too long. Their 'stick your head in the sand' strategy cost them valuable market share, eroded their market credibility and empowered more forward thinking start-ups to earn significant market share that otherwise may not have been possible. Later, Microsoft kicked off a confusing and ill advised "Software + Services" strategy and messaging campaign which simply reinforced a failed proprietary spin toward the disruptive SaaS movement that they were unable to quash.

Microsoft's history when incurring market movements which threaten their existing product lines is to first chastise or ridicule the movement, then endorse the movement with some type of proprietary alternative and if all that fails, to join the movement with an offering which normally then takes three or four versions to become competitive. That history has been realized with Dynamics CRM, and today with Microsoft CRM 2013 the company offers a strong fifth version product and is within striking distance of becoming a market leader.

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For CRM in the cloud, Microsoft has raised the bar by lowering subscription pricing and backing on-demand software delivery with solid Service Level Agreements (SLAs) complete with financial guarantees.

 

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