Microsoft has made three significant announcements in the customer relationship management (CRM) market: the purchase of enterprise resource planning software vendor Great Plains, and strategic partnerships with rival CRM vendors Pivotal and Onyx. The deals are designed to bolster the success of its .NET platform, but Microsoft still faces challenges.
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The world's largest software company Microsoft (Nasdaq: MSFT) has stirred things up in the customer relationship management (CRM) market recently, with three significant announcements: the purchase of enterprise resource planning (ERP) software vendor Great Plains (Nasdaq: GPSI), and partnerships with competing CRM vendors Pivotal (Nasdaq: PVTL) and Onyx (Nasdaq: ONXS). CRM focuses on automating front-end business practices, such as customer service, sales, and marketing. Websites have become a major investment vehicle by fulfilling customer needs. The Internet has improved the flow and quality of information, allowing employees to make critical decisions that improve relationships with customers and partners. AMR Research issued an article last week discussing the three announcements entitled, "What is Microsoft's CRM strategy?" AMR said Microsoft's objective for CRM is to leverage its brand name and sell businesses on its .NET platform, the company's new strategy to make existing software available over the Internet from personal computers and newer devices, like mobile phones and personal digital assistants. .NET is also a set of tools that enables developers to create Internet-based software and services, using open standards like XML, which is a common format of sharing information. According to Microsoft, the goal is to form constellations of computers, devices, and services that work together. By doing so, people and businesses will have more control over how information is delivered. What the deals mean The Pivotal news likely caught the attention of competitor Onyx, which also had a previous relationship with Microsoft. In late January, Microsoft and Onyx announced their own, similar, deal focusing on the financial services industry, where Onyx boasts customers like Wells Fargo (NYSE: WFC) and American Express (NYSE: AXP). The partnership includes joint sales and marketing and could be expanded to new industries in the future. There was also the $1.1 billion purchase of ERP software vendor Great Plains. ERP deals with back-end business processes, like human resources and finance. Under the terms of the deal, Microsoft will create a Great Plains division responsible for development, marketing, and sales. The purchase gave Microsoft access to the CRM market because Great Plains is the largest reseller of Siebel Systems' (Nasdaq: SEBL) mid-market offering. Challenges ahead Despite Microsoft's assurances the partnerships are equally important, AMR notes, Pivotal and Onyx are also competitors, which could create confusion among potential customers over purchase decisions. And for the time being, .NET does not exist outside a Windows world. While .NET is designed to support many programming languages, its failure to support Java could leave it out of favor with certain developers. It's doubtful that Microsoft is done making news in the e-business applications space, despite the challenges ahead of it. Further partnerships and acquisitions are likely being considered, as the company looks for new customers to develop software systems and services on the .NET platform. (eBay (Nasdaq: EBAY) agreed to do so earlier this week, as Rex Moore reported today.) Mike Trigg spends his spare time contemplating the merits of the Kemp-Roth tax cut and watching the Fox News show "The O'Reilly Factor." To see his holdings, view his profile. The Motley Fool is investors writing for investors.
Microsoft's first CRM-related announcement was a partnership with Pivotal, although the companies had worked together before. The December 2000 deal includes support of Pivotal's demand chain management solution and joint development, marketing, and sales efforts. Pivotal's demand chain management solution combines traditional CRM applications, such as sales force automation and call centers, with online purchasing systems.
AMR said Microsoft must retrain its sales force to sell to high-level decision makers, as purchase decisions become increasingly based on return on investment. (We examined the importance of ROI purchasing in a recent article.) It's also critical for Microsoft to integrate its platform with its partners' offerings because businesses are unwilling to purchase point solutions -- geared toward a specific task -- that can't work together.
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