After launching in a blaze of hype early last year, Microsoft's CRM software is on a development path that is slower than expected, frustrating some partners and customers.
Microsoft now expects to have version 2 of the software ready in mid-2005, more than two years after it released the first version. In the interim, the company has issued point upgrades to fix bugs and expand functionality, but the current release, Microsoft CRM 1.2, still lacks features found in rival midmarket products.
"I think Microsoft CRM was not ready when it was released," said one customer, Jeremy Whiteley, who switched from GoldMine to Microsoft CRM, then switched back.
Whiteley, chief executive of Promarketing Gear, bought 10 Microsoft CRM licences for his company, a supplier of branded promotional products. But he quickly ran into what he saw as a deal-breaking glitch in the software: its insertion of a long string of characters in the subject line of every e-mail sent through the system. Intended as a feature to help with tracking, the ID string annoyed many customers, and Microsoft issued a patch to let users turn it off.
That patch came only after Whiteley had decided to stop using the software. Microsoft refunded the $7,000 (£3,800) he'd spent on it. But although he found the initial version riddled with problems, he's still interested in returning when the software matures.
"I understand they're releasing a new, complicated product. I think there's potential if they do it right," he said. "We'll evaluate 2.0 when it comes out."
Getting 2.0 out will be a major milestone for Microsoft. Microsoft CRM was the first internally created product from Microsoft Business Solutions, the built-through-acquisitions group intended to gain Microsoft entry to the back-end business applications market.
Microsoft already dominates in the operating system and desktop applications market; adding software to run sales, marketing, accounting and human resources systems opens up a new frontier for the company.
For CRM functionality, the high end of the market is dominated by SAP, PeopleSoft, Oracle and Siebel Systems. The lower end is served by application service providers like Salesforce.com and inexpensive contact management systems like FrontRange Solutions' Goldmine and Best Software's Saleslogix. In the middle, for companies looking to spend perhaps $100,000 on a CRM system for a few dozen employees, is an open market, according to analysts and consultants.
"There are two areas that are really lacking something. One is the really small market, and the other is a viable, low-cost alternative, something that's not hosted, in the midmarket," said Yankee Group analyst Sheryl Kingstone.
"Microsoft is doing okay - it's still generating interest - but it has to stay active in the market so that it doesn't look like it's not prioritising it. A lot of its competition is becoming very active with the channel, and the channel is getting frustrated with Microsoft."
Green Beacon Solutions chief executive Ben Holtz is one of those channel partners getting impatient. He is a big believer in Microsoft CRM's potential, he just wants to see it realised faster.
"If it was going to be two years to 2.0, they should have delayed releasing 1.0," he said.
Microsoft doesn't like to commit to release dates, and it only recently acknowledged that version 2 would not be finished this year.
The update's feature set is still being determined, although Microsoft said it will include integration with Navision 4, an important addition for customers of the Navision applications Microsoft acquired.
Holtz's services firm has done several Microsoft CRM deals, and those customers are generally happy, he said. However, Holtz said he's not selling the software as quickly as he expected because of its functionality gaps.
"We're not actively marketing it because the effort it takes to overcome the customers' objections is just too difficult," he said. "We just closed a $50,000, 50-seat deal that will require $150,000 in customisation work. For this customer, it's a good fit, but most companies won't spend that much on customisation."
Because Microsoft CRM is a wholly new product the company is still working to fill in functionality already there in rival software. Customers say the reporting and marketing features are comparatively weak, and while integration with other Microsoft products is a selling point of the software, those connections are not yet seamless.
Microsoft claims 1,800 customers for its CRM software. In a recent report, Gartner rated the product "promising" but noted that "functionality gaps and an inexperienced partner network reduce its appeal to midsize businesses with more-complex, broader CRM needs". Despite those reservations, the research firm still expects Microsoft to be a top-five CRM supplier by 2005.
Stacy Cowley writes for IDG News Service