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With the recent surprising announcement of a platform partnership, Microsoft and Salesforce.com have set the CRM world on its ear, putting perhaps the two fiercest CRM competitors in league with each other. Cries from both camps could be heard across the blogosphere – “but they’re the enemy!”

In truth, the partnership will benefit both camps in different ways. Salesforce gets better integration with Microsoft Office, a sorely lacking feature of their software for years. Microsoft, in turn, gets more closely aligned with the unquestioned market share leader in CRM and potentially opens new avenues to explore with its Azure hosting service.

While Salesforce may seem to have gotten the most immediate, marketable benefit out of this unexpected partnership, Microsoft may end up winning the long game. Although they’ve now allowed Salesforce to remove one of Microsoft’s key selling points for their Dynamics CRM product, its tight integration to Office and Office365, this move has now forced Salesforce to bring Microsoft into the conversation with their customers. They’re no longer the “alternative” to Microsoft products - instead, they’ve essentially acknowledged Microsoft’s stronghold on Office productivity software, and in doing so, legitimized claims that Microsoft has been making for years – that without tight integration to the Office suite of products, where most workers spend their days, CRM will always be limited in how truly integral it can become in a worker’s daily routine.

So, what do we have? Microsoft can no longer boast to being the only CRM that integrates natively with Office. Salesforce can no longer position themselves as a Microsoft alternative. Software as a service (SaaS) has always been Salesforce’s strong point – Microsoft’s Azure platform is quickly becoming a strong play in the SaaS/cloud arena, and the next generation of Dynamics products are poised to fully leverage this. It’s also a good bet that Microsoft will be trying to convince Salesforce to leave Amazon Web Services (AWS) for Azure in the near future too – there have already been talks of “exploration” on that front.

What we have is the commoditization of CRM. As the major players become more similar in capability and scalability, what becomes the differentiator? In the next year plus, I expect the focus on CRM differentiation to move away from features, functions and platform and instead refocus on three key elements:

  1. Native mobility. Salesforce has always been a pioneer in this arena, and they’ll need to continue their track record of innovation to stay ahead of the curve. SAP and Microsoft have both stepped up their game in a big way recently, rolling out polished and functional native mobile applications in a space historically reserved for Independent Software Vendors (ISVs.)
  2. Cost. While IT spending overall is growing in 2014, CIOs are more conscious than ever of spending on CRM with a fragmented and competitive marketplace giving them ample opportunity for competitive bids. The low startup and disconnect costs of the SaaS model are often appealing to executives looking to hedge their bets on a new platform by not investing in infrastructure to support it.
  3. Execution. While CRMs are just getting bigger and better, they’re also becoming increasingly complex. Many businesses aren’t even beginning to leverage the entire capability of their CRM, either due to lack of expertise in the software, lack of resources to implement or some combination of both. Going forward, CRM providers and their implementation partners will be judged more critically on how quickly and fully the platform can be stood up and configured. The SaaS model provides a tremendous amount of flexibility, but it also can make companies extremely impatient with the promise that their CRM environment can be up and running “within hours.” However, the cold reality of the need for business process analysis, requirements documentation, configuration and testing remains largely unchanged. Managing customer expectations with regard to execution while accelerating deployments via SaaS where possible will be a key differentiator moving forward.

Now, cost, execution and to a lesser extent native mobility have always been key criteria for customers selecting a new CRM provider. However, depending on the customer and implementation, they very well may have (and typically did) fallen behind things like functionality, platform, integration capability, etc. in the business priority pecking order. However, with the major CRMs becoming so close in functionality, and with the move to the cloud largely removing the platform from the equation, I expect the three criteria outlined above to bubble to the top as differentiators. It will be up to the software providers and their partners to recognize and adapt to this shift as it happens to remain competitive in the ever crowded and fragmented CRM application landscape.

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