Ballmer: Microsoft to offer hosted CRM to mid-market

REDMOND, Wash. - Microsoft Chief Executive Officer Steve Ballmer Wednesday outlined some of the products and services Microsoft has come up with to solve the problems of mid-market customers, including a hosted CRM (customer relationship management) service that the company will unveil within the next year.

In March, Doug Burgum, senior vice president of Microsoft Business Solutions, said in an interview that Microsoft planned to offer hosted CRM at some point in the future but was not in any hurry to do so. However, speaking to mid-size and small business customers Wednesday at the Microsoft Business Summit in Redmond, Wash., Ballmer said Microsoft will offer a set of hosted services, including CRM, to the mid-market, pitting Microsoft directly against hosted CRM provider Salesforce.com.

"People want hosted CRM," Ballmer said. "We will respond to and address that need. We expect to give Salesforce.com a very effective run for its money by having on-premise and hosted [CRM] solutions over time."

Hosted CRM will be part of the roadmap for Dynamics, Microsoft's family of CRM and ERP (enterprise resource planning) applications. Formerly code-named Project Green, the Dynamics family includes products from the Axapta, Navision, Great Plains, Solomon and Microsoft CRM product lines.

Microsoft has always made its Microsoft CRM software available for partners to offer as a hosted service, but that market has remained small. In the U.S., NaviSite is one of the few companies offering hosted Microsoft CRM services.

The software giant will face some challenges to offer its own hosted service, as Microsoft CRM currently is not designed to share resources on a multitenant architecture. Multitenant architectures allow multiple instances of the software to run on the same hardware infrastructure.

In his talk Wednesday, Ballmer said serving mid-market customers is complicated. The company defines midmarket customers as those with 25 to 500 PCs connected to the Internet.

"I personally will say I spent more time trying to understand the mid-market than I have with any other segment in my years at Microsoft," he said. "It's not magic but it takes a little more work.... Mid-market customers you have to want to connect with."

Ballmer admitted that Microsoft's sales force has not always thought about how to address the needs of different market segments and still has a way to go to understand how to reach the midmarket. However, the company has made progress through extensive research it has undertaken in the last several years that is helping Microsoft create products that are right for the midmarket.

Mid-market customers often have to compete with large enterprises, but they don't have the IT staff or resources that larger companies have, Ballmer said. Products aimed at that market have to reduce the complexity of IT while providing high-level functionality to perform complex tasks, he said.

Another product Microsoft came up with to meet mid-market needs is a new version of the Windows Server operating system, code-named Centro, that will integrate a set of technologies in one server OS that midsized customers can easily set up and use, Ballmer said. The product will be similar to Microsoft's Small Business Server, but for a different customer segment.

"[Centro] benefits from all of our learning about the midmarket and experience with Small Business Server," he said.

Centro is expected to be available some time in 2007 or 2008, after shipment of the Longhorn version of Windows Server, on which the product is built. Longhorn is expected to ship in 2007.

(Stacy Cowley in New York contributed to this story.)