Microsoft-Hosted CRM: What's Up?

Microsoft embraced the whole SaaS concept when CTO Ray Ozzie unveiled the Windows Live and Office Live plans recently. But, the Redmond, Wash.-based software giant is also sending mixed messages on plans to host its own business applications.

Several partners reconfirmed last week the company has told them to expect a Microsoft-hosted version of its own CRM for customers who want to buy that way. Microsoft executives have privately told partners its hosting work will be “revenue neutral” to current partners. That seems to echo CEO Steve Ballmer’s statement that the company must respond to Salesforce.com—and its subscription software model—with “a variety of other managed services for smaller and midmarket-sized companies over the course of the next 12 months.”

But Brad Wilson, general manager of Microsoft CRM, denied plans for a Microsoft-hosted CRM in the near term. “Our focus is making our partners successful, [but] if there’s a segment our partners can’t reach or address, we’ll look at other options,” he told CRN.

One partner who was briefed by a Microsoft executive on hosted CRM plans just weeks ago said Wilson’s comments contradict what he and others have been told.

While this “who’s hosting” question may seem like hair-splitting, it is of concern to CRM hosting partners like ePartners and Navisite. The whole SaaS push is also worrisome for nonhosting VARs that resell and customize Microsoft shrink-wrap software—although they acknowledge Microsoft must respond to competition from Salesforce.com, NetSuite, Salesnet and others.

Said one hosting executive: “I believe Ballmer is so fed up with Salesforce kicking their butt that he’s putting a lot of R&D pressure to get this [hosted CRM] out the door.”

“The writing is on the wall,” said Arnie Bellini, president of ConnectWise, Tampa, Fla. “Microsoft has slowly been migrating its entire model toward a subscription rather than the purchase-and-update model, which is killing them.”

In the new world, he said, “you end up renting the software. That has been around a long time. When Microsoft does it, however, it sends shivers through the entire Microsoft partner spine. What’s next? When will they stop? Will they stop? Where do we fit?”