Software behemoths battle it out in CRM arena

Software behemoths battle it out in CRM arena

As software giants SAP and Microsoft flex muscles in the SMB arena and bulk up on CRM, both players will need to adopt a good channel, pricing, product, delivery, support and training strategy in order to gain a competitive edge, according to IDC Australia's senior analyst, enterprise applications, Bharati Poorabia.

She said vendors that offer resellers and end-users easy-to-deploy applications at a low cost, along with low ongoing maintenance and support costs will bear fruit in the cutthroat SMB arena.

Tracking the latest twists and turns playing out in the CRM space, Poorabia said Australian market drivers included: selection of the vendor with exact industry vertical solution; data integration with other back-end applications with good data quality; and financial viability of the vendors (stringent evaluation process).

About 85 per cent of the Australian business market is made up of SMBs.

“There’s a large chunk of money to be made and all companies are making a move,” she said.

The next six months would uncover the market winners and losers, Poorabia said.

“CRM vendors will need to respond to competitive price pressures, offer enhanced usability and deployment, along with increased retention of best practice business process models into the product offerings,” she said. Throwing its hat into the small business CRM ring, Microsoft launched CRM 1.2, which is targeted at service and sales professionals.

The technology supports Windows Server System 2003, Exchange Server 2003, Office 2003 and SBS software. The full version product costs $612 per user for sales standard and $1425 for the sales module for the server.

SAP, meanwhile, has rolled out the Business One software package for small enterprises that targets 10 to 250 employees and offers an out-of-the box business accounting with integrated CRM.

Despite functional capabilities of Business One or competitive differentiation, Poorabia said the company would have to compete on price in order to go up against Microsoft’s entrenched army of resellers.

The technology costs $3750 per user.

Climbing up the food chain, the MySAP All-in-One technology targets businesses with more than 200 employees and is an industry-specific offering.

“SAP has taken a logical strategy in maximising existing systems integrators and reseller partnerships to address the upper mid-market offering, the mySAP All-in-One,” Poorabia said. “The partner channel for this appears to be a much stronger model.”

As part of the SMB strategy, SAP is working with partners in the area of lead generation and marketing costs. SAP recently aligned with HP to offer Business One software bundles on HPs SMB servers.

SAP’s SMB market development manager, Richard Duffy, said the company had aligned with about 20 partners in Australia and New Zealand, and was trawling for ISVs interested in customizing solutions.

But selling into the SMB world comes with its own set of challenges, Poorabia said, indicating it would be rough for vendors who had traditionally served the large enterprise to offer the right solution to SMB customers.

“It is imperative that vendors understand the complexities surrounding typical SME businesses and factor the changing needs and cultural restrictions when selling into this market space.”

With the rollout of CRM 1.2, Microsoft had leveraged its position in the market by partnering with resellers and systems integrators to attract potential customers, she said.

“The key to Microsoft CRM success will be in penetration of such partnerships here in Australia to achieve broad market coverage,” Poorabia said.

Microsoft’s lead product manager for Microsoft Business Solutions (MBS), Ross Dembecki, said Microsoft would engage with a host of MBS partners and Microsoft Certified partners as part of the go-to-market strategy – a move that brought onboard a host of resellers who could purchase the technology through volume distribution.

Dembecki said most SMBs didn’t have CRM functionality – and instead relied on spreadsheets and content folder applications.

“We’re trying to bring the CRM business discipline in a lower cost, easier to use fashion to a broader set of customers,” he said.

The feature-rich implementations at the enterprise level had often been too complex to deploy and manage, Dembecki said.

“As the technology improves and software gets better - and we understand the capabilities of CRM – we see a strong opportunity in the small and mid-market,” he said.

A key Microsoft selling point was the fact the technology was built around .Net, Outlook and server technology to provide a storage-rich integrated platform, he said.

“Because it’s built on .Net – it’s easy to use and customize ... It’s a rich model for partners whereby they can extend and integrate with other business applications,” he said, adding the trick is to ensure CRM doesn’t become a separate silo.

In addition to securing reseller relations, the software behemoth would also have to establish partnering alliances with local ISVs who can provide strong vertical solutions, Poorabia said.

Dembecki said the company had partnered with 400 ISVs around the globe. A prime Australia example was the relationship with Sydney-based Vertikals, a company involved in building modules around event management.

“The good thing is the ISV community is strong and the customer doesn’t have to track down the particular module. It’s available if they need it across a wide range of verticals,” he said.

As CRM gets integrated with Microsoft’s other enterprise applications, the market will see a higher penetration rate within the existing install base.

Most of the SMB market is geared towards Microsoft operating systems and has the existing infrastructure to run MS CRM, Poorabia said.

“This in essence will offer Microsoft the competitive advantage to become a one-stop-shop provider of applications along with the infrastructure as an attractive proposition for SMBs,” she said.

But Duffy said SAP could offer an out-of-the-box solution – something Microsoft could not.

The biggest differentiator, he said, was that SAP could offer an integrated accounting application for SMBs. “Whereas with Microsoft you have to buy Navision, Great Plains, Exapta, licenses and consulting,” Duffy said.

The challenge, he said, was convincing customers that SAP was not too high-end for their small business needs.

Dembecki said SAP – typically not a mid-market frontrunner - was mainly an ERP company that was adding CRM into the mix.

Duffy said this wasn't true. The CRM aspect wasn’t just a module, but an essential part of the whole system. “When you are in CRM mode, you can drill down to everything: you can look at the customer detail, see every transactional quotation, inventory, purchase order and link documents,” he said.

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