Microsoft aims to sharpen its CRM pitch

SAN FRANCISCO--Microsoft is tired of seeing Salesforce.com get all the headlines by dishing out a combination of pithy quotes and branded chocolates to the technology press.

Although Redmond has no plans to one-up Salesforce.com CEO Marc Benioff in the candy distribution business, it is starting to speak out more strongly.

"I think Marc and Salesforce have done a good job of getting out there and telling their vision, their story," Corporate Vice President Michael Park told CNET in an interview this week. "I think we have an opportunity to do better."

Of course, Salesforce.com has been doing a lot more than just giving out chocolates. The company has grown from a scrappy upstart to a serious competitor in markets including--but no longer limited to--the customer relationship management category for which it is best known.

Salesforce has 72,000 businesses using its software and added 5,000 customers last quarter alone. This year, it expects to take in about $1.6 billion in revenue.

Still, don't look for Microsoft to mount a campaign that spends a lot of time specifically targeting Salesforce by name.

"I don't think we'll go directly after them," Park said. "I know Marc likes to do that and I just don't see any benefit to us or to customers in doing that."

Park's comments come as Microsoft is preparing to start testing a new version of its CRM product. Its current product, CRM 4.0, is offered globally as a server software product and in the U.S. and Canada as a hosted service as well.

Instead of aiming squarely at Salesforce, Microsoft's Dynamics business, which includes the CRM product, tries to mimic Redmond's companywide efforts to portray itself as "all in" when it comes to the cloud. With Microsoft spending more and more of its massive R&D budget on cloud services and data centers, Park said Salesforce will have a tough time keeping pace. In explaining the strategy, Park heads to a whiteboard and draws a nine-box chart showing how Microsoft offers a combination of platform, applications, and infrastructure across servers and private and public clouds. Salesforce, he suggests, is only dabbling in a few of those categories.

And while Salesforce is profitable (it made $16.5 million in net income on $394 million in revenue last quarter), Park maintains it is not yet big enough to be a long-term competitor.

"Their business model is predicated on high-scale and they have to reach Amazon-like scale to be sustainable and they have not hit that threshold yet," Park said.

The dialing up of the rhetoric comes as Salesforce is not only competing with its CRM and Force.com products, but is also looking to encroach further on Microsoft's turf. The company recently introduced its Chatter product, which bills itself as Facebook for businesses, while also competing against Microsoft's SharePoint, one of Microsoft's significant hits of recent years.

Park said that Microsoft is paying close attention but sees itself in a good position vis-a-vis Chatter.

"I have a hard time, to be honest with you, separating the reality from the pixie dust," Park said. "I think what they are trying to do is create another vehicle of chat that is an element of social CRM but doesn't fully encompass the breadth of what social CRM can be. It's a strategy on their part to try to create a little more stickiness in their install base."

Microsoft also recently sued Salesforce over patent infringement, though the two companies settled last month, with Salesforce agreeing to pay Redmond an undisclosed amount.

For Microsoft, one of the interesting questions will be where the company goes as far as support for mobile devices with its business software. So far, the company has focused on offering lightweight Web versions of its product that can be used from phones, in addition to a simple CRM iPhone app.

Park said Microsoft's Dynamics unit had talks with the Windows Phone 7 team and that his unit is also exploring whether to do an iPad application.

"I would say we are looking at it right now," Park said. "I think the thing that's going to determine a lot of those decisions for us is that we follow the strategy that is set out by the overall Microsoft business division. If we go that way as a division, then we will follow in line with that."

Park's comments seem to suggest that the whole business division, which also houses Office operations, is still grappling with the decision of whether to develop programs for the iPhone and iPad or whether to continue betting only on Windows and Windows Phone when it comes to mobile devices.