Microsoft Vows To Fix CRM Margin Woes
In January, Microsoft made its CRM offering available through volume licensing, and MBS partners now source it through distributors or LARs. As a result, several MBS partners said their margins on Microsoft CRM had fallen to 30 percent or even 20 percent from 40 percent.
To make up for that margin now going to an intermediary, Microsoft offered up a new Certified Software Adviser (CSA) fee that brings more points to the partner if the partner influences the sale. Microsoft hoped that the sourcing change would lead to higher sales volumes that would enlarge the pie for everyone. (See story.)
But partners said margins have continued to erode, and several partners who sold both CRM and the higher-margin Great Plains ERP apps stopped selling CRM. "The promise was that the volume would rise and the sales cycle would shorten. I'm still waiting," said one East Coast partner who requested anonymity. "When is 40 percent not 40 percent? When it's 20 percent."
Microsoft is watching the situation carefully, the group's top executive told CRN last week. "The intent was to be margin-neutral. The points they receive from the distributor, the points from the CSA fee, and additional points atop that based on volume,the goal was to get people back to %85 30 points [and] 40 points for those selling higher volumes," said Doug Burgum, senior vice president, MBS Business Group.
"If [it] turns out that this is not the case, we [can] go back and adjust the economics to make sure we're correctly compensating people," he said. But first, Microsoft wants to review more sales data over a longer period to make sure it understands what the new margins actually are.
Burgum reiterated that there are no plans to put Navision, Great Plains and Axapta offerings through the same volume sales model.
Last week at Convergence 2004 in Orlando, Fla., MBS unveiled its product road map that includes mobile sales enhancements to CRM 1.2, due this summer; a 2.0 release with more service and campaign management functions, due in the second quarter of 2005; and a 3.0 release with tight ties to Office, due in 2006.