Tuesday, July 10, 2007

Big Surprise: Microsoft Gets Aggressive On 'Live' CRM Pricing

Microsoft, true to its volume sales heritage, will offer its upcoming hosted CRM Live service for as little as $39 per user per month.

That figure puts it well under the list prices of competitive offerings from Salesforce.com and NetSuite. Most of those rival SKUs list for well over $100 per user per month although discounting undoubtedly occurs.

There will be two main CRM Live “SKUs”: an Enterprise edition for $59 per user per month and a lower-end Professional edition for $39 per user per month as an introductory price good for 2008. The main difference is that the professional version provides no offline data synchronization.

And, true to its word, the company says sales of even the Microsoft-hosted “Live” CRM will carry a partner component. In fact, “customer access will be entirely through partners. We certainly believe partners add value and want to make sure they’re involved,” said Brad Wilson, general manager of CRM for Microsoft.

Those partners will get 10 percent margin on the initial sign up and ten percent forever annuity from then on, Wilson added.

Salesforce.com, which blazed the trail with hosted CRM, offers a 10 percent referral fee, but it is a one-time payment—there are no residuals. Salesforce.com is, however, encouraging partners to do customization work and app development atop its platform for fatter margins. NetSuite partners who hit certain target numbers on net new sales, can get 30, 40 even 50 percent margins.

The good news for Microsoft partners is that $39 is so inexpensive, it could spark a sales surge. The bad news is that 10 percent now-and-forever on $39 per user per month may not float a lot of partners’ boats.

Still, realistic solution providers are resigned to the reality of declining margins on software license sales and work to differentiate themselves on customization, adding vertical capabilities and other value.

In addition, Microsoft is pledging $20 million more to help existing partner organizations grow their capacity, said Barb Edson, director of Dynamics marketing.

That money is earmarked for training and recruiting employees for existing Microsoft Business Solutions partners. Microsoft has taken some hit for trying to broaden distribution of its MBS lineup at the expense of existing partners and this is designed to remedy that

The goal is to add 1,000 new employees to partner organizations globally, Edson said.

And, in other programmatic news, Microsoft launched a “Certified for Microsoft Dynamics” certification. ISVs who certify their MBS Dynamics-based applications can get up to $10,000 from Microsoft.

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