’s In-Office Appearance users who logged on late last week might have noticed a new link. Clicking on it automatically added a menu to Microsoft Office 2000 or 2003 Word, Excel and Outlook.’s Office Editions integrates the company’s hosted customer relationship management (CRM) application with Microsoft Office 200 and 2003.

The menu options deliver key customer and sales information directly into the applications, so that users can create documents and reports with real-time data from the CRM application.

The upgrade lets users create customized business productivity tools, such as automatic proposal generators and analytics, directly within Excel and Word. included a toolkit to show its customers how they can take advantage of Office 2003’s extensibility via Visual Studio .NET 2003 to add elements from’s sforce Web services platform. “Our customers may have very specific needs,” said Peter Gassner, general manager of the sforce division. “This lets them do custom development to add things over and beyond what we have in our delivered integration.”

Gartner analyst Wendy Close said that it’s fairly common for standard CRM and sales force automation applications to integrate with Office, but not for hosted applications like’s .

“One key issue clients complain about application service providers (ASPs) is the perception that they can’t integrate with other systems and technologies very easily,” she said. “This is one example of them overcoming the objection.”

Another differentiator is the pricing model: the upgrade is free, while most vendors charge extra for upgrades or new modules, she said. The new Office Edition is available immediately to all customers simply by clicking a link in the Web interface.

Gassner said his company chose Microsoft Office because customers use those applications frequently. “Allowing access to information right from within Microsoft is more convenient for users, and that will drive adoption and use.”

She added there were no plans to include links or information on’s software in new computers. He said his company’s partnership with Microsoft was tight at the executive and development levels, but Microsoft had provided neither cash incentives nor price breaks for the integration project. Office Edition is built on the sforce 2.0 on-demand application server, which the San Francisco-based company announced mid-2003. It’s one of the showiest examples of Web services to date, said Yankee Group analyst Laura Didio. “It’s a natural evolution to link Office with the .Net framework and Web services this way. Microsoft is still mainly an operating system and office productivity suite company, and they’re trying to use their core products to drive sales and to drive Microsoft deeper into enterprises and Web services.”

Microsoft’s opening of its application program interface (API) to third-party developers is a smart move, according to Didio, and partly the result of Linux keeping it on its toes. “Microsoft is trying to create a more accessible and welcoming environment in order to get companies like to use Windows rather than Linux or open source. If Microsoft is to be a powerhouse in new paradigms, it has to forge links between its core products and new types of Web-based applications.” reports 8,400 customers and 120,000 subscribers. Its overall 2002 market share was three percent, according to Gartner, and Close thinks it will be around that for 2003. The company’s stronghold is small- to medium-sized businesses, where it owns nine percent of the market. Gartner expects 28 percent of small- and medium-sized enterprises to choose hosted CRM by 2006, with 10.8 of all enterprises choosing that model. That’s up from a projected 4.4 percent of the total enterprise market that chose hosted CRM in 2003.

“Larger enterprises aren’t interested in ASPs,” Close said. “They want more customization and integration.” She said big companies want “business process fusion,” the ability for CRM to provide data from quote to order to collection, while doesn’t deal at all with orders or inventory.”

Gartner’s numbers don’t paint as a sleeping giant. “For them to be one of the top players in the overall CRM market,” she said, “it’s not going to happen.”

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