Microsoft threat also an opportunity, says Aberdeen Group

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Microsoft’s entry into the CRM market is a huge market opportunity for vendors as well as the biggest single threat to them, according to research firm Aberdeen Group.

“Microsoft’s announcement signals what Aberdeen research indicates will become a sea change in the CRM industry,” argues analyst Christopher Fletcher. “[The Great Plains] acquisition, coupled with Microsoft’s continued focus on and investment in .NET, .NET My Services, and its Passport authentication system, indicates that Microsoft is going to once again change the rules of the game.”

Aberdeen identifies the SME and mid-markets as the largest opportunity in CRM. Given the limited resources of companies in this space, a chance to buy what appears to be a cost-effective system from Microsoft, and one that closely resembles the Office Suite already on the desktop, will represent an attractive proposition.

“The real issue here is not whether Microsoft will pose a competitive challenge to established vendors in CRM, because it clearly will,” says Fletcher. “The real question to ask is, What opportunities and what new markets are being created by Microsoft’s entry into the market?”

A CRM technology or services supplier with the vision to embrace .NET could develop a core competence augmenting CRM applications with Web-based services. Aberdeen predicts that the new model for CRM will be a hybrid one, consisting of an application on the desktop, integrated and enhanced by dynamic data provided by a .NET application over the Web.

“In our view, Microsoft’s intent is not to dominate the CRM market: Its real motive is to evolve its business model and to sustain its historical growth and profitability levels by providing Web services,” concludes Fletcher. “CRM represents a beachhead that Microsoft needs to control to accomplish its objective. The other technologies — .NET/.NET My Services, and Passport — are already in place and are steadily gaining advocates.

“There is no doubt that the CRM market will be changed by Microsoft’s MS CRM announcement. We continue to believe, however, that for the company — software vendor, systems integrator, or partner — with the vision, the appropriate technology and services base, and the financial resources to weather these changes that more opportunity is being created here than is being destroyed.”

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