Microsoft Slashes CRM Live Pricing for Partners

The price cut, of course, is part of Microsoft's ongoing support for its partner network that the company must leverage to make inroads in the Software as a Service space. A drop in price would also encourage developers and partners to build on top of the Microsoft platform, thus increasing adoption organically, or in Web 2.0 jargon, virally.

Bigger Company, Better Margins

Providing better margins to partners and developers to encourage adoption is the chief aim behind the price cut, Yankee Group Analyst Sheryl Kingstone told CRM Buyer.

"Microsoft is using their platform to empower vertical solution providers to build on top of it, cost effectively," she said. That has been Salesforce.com's (NYSE: CRM) go-to-market approach for the last few years as well, but the two companies' offerings do not compare that easily.

At $15 per user, Microsoft is the cheaper application, but as Kingstone pointed out, that price point doesn't include management, hosting fees or a datacenter.

"Microsoft is not providing the hosting, which is why it is so cheap," she explained.

For these reasons, the Salesforce.com option might be a better play for smaller partners. Larger system integrators, with a datacenter already in house, would find the margins to be higher with the Microsoft platform, all things being equal, Kingstone said.

"Some of the larger customers already have the necessary infrastructure investment in place, such as the larger telco houses," she added. "For these companies, building CRM apps on top of the Microsoft platform would be ideal."

Driving Sales

The drivers behind the partner price cut might include more fundamental factors as well, speculated Charles King, principal of Pund-IT.

"Any time that a vendor cuts prices for its partners it is about helping to make the partners succeed at selling your products," he told CRM Buyer, adding that Microsoft's recent offerings in this space may not have sold as well as the company had hoped and this is one response.

"The Software as a Service space has changed quite a bit over the last several years. There are a lot of both vendors and potential customers interested in it now."

The Microsoft Dynamics CRM on-premise and partner-hosted applications have reached more than 11,000 customers, including 475,000 users, according to Microsoft. Its latest iteration of Microsoft Dynamics CRM, codenamed "Titan," uses a single multi-tenant code, allowing partners and customers to deploy both online and on-premise.