Denver – Microsoft is coming out with two new SKUs for Dynamics Live CRM with an aggressive price chop intended to capture market share against software-as-a-service players such as Salesforce.com and Siebel.
The two CRM Live editions are professional and enterprise. Both products were US$75 per user/per month, but will now be US$44 for the professional edition and US$59 for the enterprise edition. All versions will have full sales, marketing and service modules that can be accessed through Outlook or a browser client. The only difference is the enterprise edition offers offline data synchronization.
The professional version will be released in the third quarter of this year, while the enterprise version will be out in the first half of 2008. But Microsoft is taking its price chop one step further with the professional version, with a promotion price of US$39.
There will also be a partner engagement model for CRM Live where partners will be compensated on a re-occurring basis, where for each year they will receive 10 per cent on subscription revenues so long as they are the partner of record. In 2008, there will be a special incentive of 15 per cent off the re-occurring subscription revenues.
Joel Martin, vice-president, enterprise software research with IDC Canada, believes customers want this because the true SaaS model has not taken off in Canada. “CRM is at a watershed moment in the market and will grow more than 10 per cent in the next few years,” he said.
Martin said he was surprised by the dramatic price drop, but the industry specific modules could make CRM implementations easier. “A few years ago CRM implementations failed because they did not meet the needs of the customers,” Martin said.
Jim Heaton, CEO of Vox Wireless, a Toronto-based solution provider, said the price cuts will put immense pressure on Salesforce.com since it is a publicly traded company, and would be deeply impacted if 25 per cent of its revenue was cut just to match Microsoft’s new prices for CRM Live.
“If you compare the price of what is coming out, it is about half (of what Salesforce.com charges), but that is just half the story. If you compare feature-to-feature with some of Salesforce.com’s plug-ins, for an average customer you have to add another $40 to $50 a seat. Really it is one third the price,” Heaton said.
Heaton said that partners need to do the math before entering this market so that they can figure out how to make money from CRM Live.
Vox Wireless has many 10 to 15 seat customers and for every $10 spent the company gets $1 for professional services, Heaton said.
Now that Sharepoint is free with SQL Server, Heaton believes there are multiple opportunities for professional services partners. For example, after Sharepoint, customers will be interested in business intelligence, and with Office Communications 2007 fitting into CRM Live long life cycles can be created with customers.
The average commission structure for CRM Live license is 20 per cent for the enterprise version. “If a seat is $1,100 our commission is $220. At $59 (for the enterprise version) that is now $700 and if you make 15 per cent on that it is now $120 per seat. The break even point for partners is two to three years. If you do the math there may be a cash flow issue early on, but it can turn into a cash cow after that,” Heaton said.
Microsoft also announced Customer Early Access Program, a partner-led plan offered for only the professional version of Live CRM. This no charge program will be extended to the end of this year and can work for any customer with five seats or more.
The company is offering pre-configured vertical templates for the public sector and manufacturing industries.
Frank Falconer, CRM product manager for Microsoft Canada, said this offering is essential with specific demos and resources for these two industries for now. Other vertical packages will be announced later on, he said.
“When CRM Live is out it will have a partner solution marketplace and ISVs can build add-ons to CRM Live and place it on this online market place. This is a great opportunity for ISVs who develop add-ons for on-premise solutions and can now be ported over to the Live version,” he said.
Falcone added the CRM Live has the same code as the regular CRM package and therefore users can go back and forth from an on-premise to hosted environments.
“This leads well to Software+Services by giving customers the power of choice with deployment, purchase price and user experience,” Falcone said.
More than 600 partners are currently working with the pre-release versions of CRM Live code named Titan. CRM Live is free and billing will start in the first half of 2008.
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