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With the release of Dynamics CRM 3.0, it’s clear that Microsoft is determined to become a major player in the customer relationship management software sector.

It also appears that CRM 3.0 is destined to become a leading contender in the field, at least in the small and midsize markets, if only because Microsoft already has a large captive audience of customers who are working with Windows, Office, Outlook and SQL Server.

It’s quite likely that Microsoft will sell plenty of CRM seats to companies that really aren’t able to afford the heavy implementation and customization costs that are typically required to install CRM packages from SAP, Oracle, PeopleSoft or Siebel Systems.

Not only does Microsoft pose a competitive challenge to the high-end software companies, but it also represents a serious challenge to the scrappy lower-end CRM providers such as, NetSuite and RightNow Technologies.

Click here to read how Microsoft plans to reach a broad market with Dynamics CRM 3.0

These companies have been pitching the ease of implementation for their on-demand CRM applications, particularly for SMBs that can’t afford to spend months and tens of thousands of dollars on installation and customization consulting services.

The whole point of shifting to an on-demand application is to let the hosting service deal with the IT management and integration issues.

Microsoft is counting on ease of use and integration with the familiar Outlook interface to win over new customers.

On the face of it, Microsoft seems to have a winning hand. But ease of use only asserts itself once an application is fully deployed and running reliably.

Microsoft is going to have to show that deploying CRM 3.0 is a lot easier to deploy than the earlier version to prove that all those important total cost of ownership issues won’t get out of hand.

The problem is that Microsoft will still be relying on partners and resellers to sell and support the product.

It claims that CRM 3.0 delivers low total cost of ownership because it can be configured and customized without calling in the services of application programmers.

But it remains to be seen whether that holds true for some smaller businesses without extensive IT resources that want to implement CRM 3.0.

To read John Pallatto’s commentary on why Microsoft is taking a short-sighted approach to on-demand software, click here.

CRM software isn’t typically sold and installed like a shrink wrapped box of Microsoft Office for Windows. It’s not necessarily as simple as taking a CD out of the box and booting up the installation routine.

Jock Putney, CEO of MDServe Inc., a developer of healthcare information systems based in Houston, said deployment costs and reliability issues were the key reasons why his company switched from Microsoft CRM 1.x to

Next Page: Cutting deployment pain.

MDServe is itself a Microsoft .Net development partner so it is used to working with Microsoft products. However, a major reason why the implementation failed was because the package was “originally sold by a value-added reseller who claimed to have more product knowledge than they really did have and they overstated the capability of the product,” Putney said.

MDServe wanted a CRM application that could be seamlessly integrated with a single central database of customer information, he said. The company eventually gave up on Microsoft CRM after spending more than six months and $60,000 in consulting costs back in 2003 attempting to get the product to work.

“We came away with the feeling that [the consultants] didn’t know what they were doing and the product just wasn’t ready for prime time,” he said.

The company switched to and found that the integration and total cost of ownership issues were much more favorable.

“We configured ourselves in a week,” he said. Furthermore the adoption rate among the sales representatives and managers was much faster.

Half the battle in the success of any CRM system is to convince the sales representatives to take the time to enter accurate information into the application, Putney said.

To get them to use it consistently, they need to feel the application “is their best friend,” he said.

Currently, about 60 sales staff members use the product and the best proof that the application is working is its ability to generate useful and accurate reports, Putney said.

At this point, Putney said he wouldn’t even consider taking a look at Dynamics CRM 3.0. “I wouldn’t give them the benefit of the doubt,” he said.

Microsoft has put a lot of work into CRM 3.0 to try to eliminate this kind of customer experience. But how well it has succeeded won’t be apparent until a significant number of customers start to put it into production.

Click here to read why Microsoft will rely on partners to provide on-demand versions of its CRM package.

But these days, customers are a lot less patient dealing with software deployments than they used to be. They are much less willing to buy into the proposition that application deployments by their nature have to be painful, difficult and expensive.

In fact, more than ever they expect that enterprise application deployments will be simple and uncomplicated processes that allow them to work productively in short order without spending a lot of extra money on exorbitant consulting services.

That really isn’t so much to ask for.

John Pallatto is a veteran journalist in the field of enterprise software and Internet technology. He can be reached at

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