NU Online News Service, April 4, 2003, 5:23 p.m. EST – Microsoft Corp. has picked Avaya Inc., Basking Ridge, N.J., to help it beef up the ability of its new Microsoft Customer Relationship Management software to handle the phones.

Avaya, a major communications technology company, has agreed to license Microsoft CRM technology and integrate it with the popular Avaya IP Office system, the companies say.

The companies have predicted that the first version of the Avaya IP Office system with Microsoft CRM capabilities could be available by the end of June.

Insurance call center technology experts say the real news may be that Microsoft is leaving room for Avaya and Avaya’s competitors to continue to sell the software that runs the telephones.

Insurers and other companies waited for months to see what features Microsoft would include in Microsoft CRM Version 1.0. When Microsoft introduced the system in January, the experts concluded that the system lacked many of the features needed to manage sophisticated telephone systems right out of the box.

Although Microsoft would prefer that reporters highlight the Avaya partnership, “Microsoft CRM in and of itself does not have extensive call center functionality,” Microsoft spokesman Jamey Chown concedes.

Version 1.0 focuses mainly on managing information drawn from the Microsoft Outlook electronic mail system, according to Microsoft’s own marketing materials and product presentations.

Insurers and insurance brokers that want to add Microsoft CRM to sophisticated call center systems today would probably have to put a team in charge of connecting the system to new or existing telephone management systems, experts interviewed say.

Of course, even if Microsoft CRM had everything a company needed to manage its telephones, some insurers and agencies might wait awhile before adopting it.

“I believe it’s a step in the right direction, but I believe companies are a little hesitant to implement it,” says Peter Kasabov, president of Connextions.net Inc., Orlando, Fla.

Customers worry about the problems that software companies often have with the first versions of complicated new products, Kasabov says.

And Microsoft itself emphasizes that it is aiming Version 1.0 of Microsoft CRM mainly at small and midsize businesses, rather than at giant “enterprise space companies.”

“What we’re doing in the mid-market is trying to design a new system, bringing to market a brand new system designed specifically for these customers,” David Thatcher, manager of Microsoft’s CRM strategies, said in July during a talk in Silicon Valley, according to a transcript on Microsoft’s Web site.

Insurance is also different from other industries, because of the enormous regulatory burden it bears and the huge size of the bigger companies’ processing needs.

“I think Microsoft is still looking at how they transform from a product sale to a solution sale,” says Larry Fortin, director of the insurance practice at Edgewater Technology Inc., Wakefield, Mass.

At NaviSys Inc., Edison, N.J., insurance “is all we focus on,” says Tom Famularo, senior vice president of product development. “We have vertical expertise.”

But Microsoft has built the CRM package around the .NET standard, which is supposed to help customers to mix and match business software products. That means that strong sales of Microsoft CRM could help expand the entire call center software market.

Aspect Communications Corp., San Jose, Calif., for example, is a communications software company that already supports the .NET standard. Microsoft CRM buyers could buy Aspect software to manage the telephones.

The fact that Microsoft is focusing on small and midsize businesses with Microsoft CRM “is good news,” says Karen Hardy, product marketing director at Aspect. “That will really help us identify new markets as well.”

At NaviSys, Famularo sees the Microsoft product release restoring some luster to the term “CRM.” “CRM is pretty much a bad word to use in the insurance industry right now,” Famularo says. “[Insurers] have spent a lot of money and really don’t have a lot to show for it.”

If Blue Cross and Blue Shield of Tennessee, Chattanooga, Tenn., were shopping for call center software, it would have to consider Microsoft CRM, says Hugh Hale, director of technical services at Blue Cross and Blue Shield of Tennessee. “We’re almost a total Microsoft shop, anyway,” he adds.

One area where Microsoft could make a difference is information about prices.

Typical insurance call center technology budgets can range from $3,000 to $5,000 per seat for companies that are updating reasonably current sites, and from $10,000 to $12,000 per seat for companies that are setting up systems from scratch, according to Kevin Kraft, a financial services consultant at Cap Gemini Ernst & Young L.L.P., New York.

Representatives for most of the companies interviewed for this article refused to talk about product prices.

Even for customers, getting prices is “almost impossible,” Hale says. “Even after you sign a contract.”

Just getting a firm price for the hourly labor rate is difficult, Hale reports.

Microsoft may have pushed other players in the market toward increased pricing transparency by announcing product prices. It has stated that the cost of Microsoft CRM licenses will cost $395 per seat for the basic version and $1,295 for the professional version.