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Taking the next step in its walk toward an on-demand version of its Dynamics customer relationship management software, Microsoft announced Jan. 10 that it’s releasing the code for its next major upgrade, Titan, to about 300 partners.

The early look-see could help ease some partner fears around the impact of an on-demand model from Microsoft.

Titan, expected this summer, has a couple of major attributes that bring it into the realm of SAAS (software as a service), or on-demand software: multi-tenancy capabilities (a shared infrastructure for all users) and a single code base across on-premise and on-demand versions.

While both attributes help partners decrease their development and infrastructure costs (and pass those savings on to customers) it also changes a partner’s revenue stream from one of annual license fees to monthly fees.

That shift has led to a lot of questions for partners.

“The biggest change [for partners] is that CRM becomes a multi-tenant, host-able application,” said Rob Boise, an analyst with AMR Research in Boston. “The early fears were that Microsoft was going to host [Titan] themselves and that most on-demand applications tend to be sold direct, rather than indirect,” cutting partners out the equation.

During Microsoft’s PartnerWorld conference in the summer of 2006, when Titan was announced, the topic of conversation seemed to center around how its introduction would affect partners.

“There is a fundamental shift going away from a license model to on demand,” said Mike Mazur, vice president of channel sales and alliances at NaviSite, a Microsoft partner, in an interview with eWEEK at the conference.

“Right now, Microsoft partners are judged on how many licenses they sell. With on demand that goes away … now we’re selling access to servers that are running applications. There is a shift that needs to happen so people understand where their cheese is, and where it’s moving to, to make it successful.”

AMR’s Boise said that Microsoft has done a pretty good job dissembling Titan’s role with partners, both at PartnerWorld last year and with this early release of Titan.

“They’ve released pieces of the Titan code to partners that includes a preview of Microsoft CRM Live. A subset of Titan, Microsoft CRM Live is geared toward very small businesses—those with about 10 employees—and is hosted in Microsoft’s Windows Live data center.

“Both are built on the same code base, but Live is going to be hosted directly from Microsoft,” said Boise. “Titan will be hosted by partners or partners of partners.”

Click here to read more about Microsoft’s Dynamics CRM Live.

Early adoption partners have access to the Titan code through Microsoft’s Technology Adoption Program. The idea is that with an early peek at the on-demand code, partners will have the ability to develop a fuller understanding of the on-demand model to determine how it will jive with their business model.

Brad Wilson, the general manager of Dynamics CRM at Microsoft, said that the 300 partners using Titan now are building mash-ups, vertical solutions and plug-ins. Over 1,000 partners will have access to Titan by the second quarter of 2007.

“Many of the things [partners] can do on premise, they can do with on demand—streaming news feeds, collaborative applications—all things are equally applicable,” said Wilson, in Redmond, Wash.

Next Page: Ballmer outlines on-demand opportunities.

“There are two models today: on premise and SAAS (through partners). With Titan there is on premise, SAAS through partners and SAAS directly run by Microsoft … Partners are exposed to all three models and they can decide how it maps to their model.”

During the 2006 PartnerWorld conference, Microsoft CEO Steve Ballmer outlined five key areas partners can look for opportunities within the on-demand model: Generating advertising revenues, referral fees, actually hosting applications, reselling access to other partner’s application services, and engineering custom integrations that build on the core applications in Office Live.

Wilson said he has been coaching partners to look at SAAS as another way to deliver a service out to their community. But, he cautions, partners should make sure they understand how to participate.

“It takes time to build an on-demand service or plug into it. You don’t get them overnight,” he said.

There is also still the issue of pricing—one that Microsoft is still hammering out.

The issue is that Microsoft charges partners an upfront license fee to resell its software, but hasn’t yet determined what it will charge for on-demand usage. “You can’t charge [partners] for upfront licenses and have partners sell on a monthly basis,” said Bois. “It would take years for partners to recoup [their investment]. My guess is Microsoft will sell [software to partners] on a monthly basis.”

Microsoft CRM partner Jason Hunt, the chief technology officer at Invoke Systems, is part of the initial group of partners previewing Titan. He doesn’t see any issues with the pricing or licensing structure of an on-demand offering.

“I don’t get it with partners. The bill rates we’re allowed to charge on doing a CRM deal are very profitable,” said Hunt, in Belleview, Wash.

“I’ve heard [about pricing issues] from other partners and my biggest comment is you get out of it what you put into it. A lot of people are looking for a quick win—classic solution selling. And Microsoft CRM will really test your mettle. You have to make sure in every deal what you put in front of a customer is what they do.”

Hunt said one of the most advantageous upgrades in Titan is the ability to leverage his team’s development work across on-premises and on-demand platforms. The point with Titan is that a partner can configure a system once and deploy it whether it’s on premise, hosted by Microsoft or hosted by a partner.

“It doesn’t matter. The behind-the-scenes software is the same,” he said.

Another plus for Hunt with Titan is its multi-tenant capabilities, which will enable him to save on infrastructure costs. “CRM 3.0 was not multi-tenant,” he said. “Every time I wanted to set up a new implementation for a customer I had to get a new server. Now there are these efficiencies and scale with hundreds of customers using the same server, the same hardware.”

That said, Microsoft is doing multi-tenancy a little differently than other on-demand CRM vendors, according to Hunt. He pointed out that while the Web front end of Titan is shared, the database layer is segregated.

“It’s almost identical to on premise,” said Hunt.

Competitors like will likely capitalize on that fact as a negative. Marc Benioff, the outspoken CEO of, has been a big proponent of a multi-tenant architecture as the true tell-tale sign of on-demand software.

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