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Jul 11 2007   12:23PM GMT

CRM Live a partner play? Kind of.

badarrow Barbara Darrow Profile: badarrow

To be clear: When Microsoft says CRM Live will be totally partner inclusive, it really means partners will be an absolutely required part of the sale only during the ramp-up stage.

Till the end of the year, customers wanting to try the nascent Microsoft-hosted service must work with a Microsoft certified partner to come aboard. And partners will get a 10% referral fee now and in the future for customers they land.

After the final version of the service goes live early next year, however, CRM Live will also be available directly from Microsoft, company execs said late Tuesday.

To be fair, it makes sense that a service designed for small businesses, be available as a direct download; but Microsoft has sent mixed signals on that until this week.

When the provisioning and payment engine Microsoft is using to underpin the service and the billing for it, someone will “flip a switch” and the flood of new CRM Live customers will begin. Or so Microsoft hopes.

As for pricing, the consensus is that Microsoft’s introductory price of $39 or $59 per user per month is aggressive but not unprecedented.

While the bulk of Salesforce.com sales appear to be in its $125 per-user-per-month enterprise service, some analysts say the newish Workgroup edition — at $600 for five users per year — is plenty cheap. If you do the math, that works out to be about $10 per user per month, a Saleforce.com spokeswoman helpfully points out.

The 10% margins on referrals may not be much for many partners used to fatter ERP margins, but it’s nothing to sneeze at, according to Ryan Toenies, vice president of CRM Solutions for Inetium, a Bloomington, Minn.-based Microsoft partner.

He said companies like his, which rely mostly on services revenue, can use the 10% margin to cover the cost of sales. “This is a very interesting annuity system and if you start a customer on Live and then he goes to on-premise, you get additional margin. It’s very attractive,” Toenies said.

Microsoft’s long windup to Live CRM has caused customers who were weighing Saleforce.com purchase, to wait and see, he said. AMI Partners’ analyst Laurie McCabe says other than Salseforce.com, there are very capable and price-competitive online CRM offering from upstarts as Entellium, which starts at $50 per user per month.

While these are all direct sales, enterprising partners see opportunity in customization and consultation services in these offerings. And Salesforce.com’s AppExchange platform clearly got Microsoft’s attention. The Big M this week promised a Windows Live Marketplace that will present third party apps that work in conjunction with Live.

Presumably ISV partners will be interested in that. The question here is whether, like Salesforce.com, Microsoft will collect margin on the sales its partners land through the site.

Meanwhile, one nagging question — whether Microsoft will self-host ERP applications as well — remains unanswered.

Mogens Elsberg, general manager of Dynamics NAV, one of Microsoft four ERP brands, says the company continues to ponder that option. Given the angst Microsoft Business Solutions partners already have about margins and the erosion they have already seen in ERP sales, they’ll be watching that market closely.

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