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Microsoft CRM Needs Work

Microsoft Corp. (Nasdaq: MSFT) this week overhauled its Customer Relationship Management (CRM) offering in an attempt to gain market share from its rival Salesforce.com Inc. (NYSE: CRM). (See Microsoft Previews CRM Solution.) But the strategy appears undercooked.

CRM technologies, which enable users to manage specific data about their customers, such as buying patterns, are seen as a key IT weapon, particularly in areas such as retail and manufacturing. And research firm The Yankee Group cites customer retention as the number one challenge for 60 percent of sales and marketing executives across all industries.

Microsoft's CRM 3.0 is aimed at plugging the gaps in earlier versions of the product, first launched in 2002. Along with a new diagnostics wizard for faster installation and a range of new interfaces, it introduces a subscription-based licensing model for hosted CRM deployments, which uses the same code as the companys on-site CRM offering.

Traditionally, users have bought CRM software from vendors and deployed it themselves across their own infrastructures. But over recent years vendors like Salesforce.com have started offering "hosted CRM," whereby the vendor does the CRM work as an outsourced service. This is believed to offer users a more favorable return on investment (ROI) than deploying CRM themselves.

However, it is still early days for Microsoft’s hosted CRM strategy, chiefly because it requires customers to work with partners instead of directly with Microsoft. A Microsoft spokesperson would not reveal whether the vendor is planning to move to this model, although she says that customers are getting plenty of choice at the moment. "Whether (the CRM) is delivered on premise or as a hosted solution is based on the specific needs of the customer," she adds.

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